A^.RiC.  DEPT. 


MARKETS 

and 

Rural  Economics 

Science  of 
Commerce  and  Distribution 


An  Investigation  of  Agricultural  Production  and  the 
Economics     of     Distribution;     Cooperation     in 
Marketing;    Rural    Credits;    Agencies    of 
Impending    Change;    Present    Condi- 
tions and  Tendencies;  Future  Pos- 
sibilities and  Opportunities. 

By  T.  J.  BROOKS 

\\ 

Professor  of  Markets  and  Rural  Economics 

in  the 

A.  and  M.  College,  of  Mississippi 
Author  of   "The   March  of   Intellect" 


THE   SHAKESPEARE   PRESS 

114-116  E.  28TH  STREET 

NEW  YORK 

1914 


37 


Copyright,  1914, 
By  T.  J.  BROOKS 


DEDICATION 
To  THE  YOUTHS  OF  THE  UNITED  STATES 

IN  WHOSE  KEEPING 

RESTS  THE  DESTINY  OF  THE  REPUBLIC 

THIS  VOLUME 

Is 
DEDICATED 


PREFACE 

It  matters  not  what  vocation  we  may  follow,  each 
of  us  is  vitally  concerned,  both  in  a  material  and  social 
way,  in  the  subject  matter  of  this  work.  By  far  the 
greater  activities  of  mankind  are  exerted  in  the  pro- 
duction, distribution  and  consumption  of  the  material 
things  of  life.  It  is  a  part  of  the  task  of  civilization  to 
so  conduct  these  activities  as  to  insure  the  greatest 
degree  of  efficiency. 

Without  sufficient  production  life  cannot  exist;  with- 
out proper  distribution  civilization  must  halt;  without 
the  application  of  the  principles  of  economics  to  both, 
wanton  waste  must  result;  without  an  adequate  sys- 
tem of  markets  and  finance  neither  production  nor  dis- 
tribution can  be  economically  performed.  The  neg- 
lect of  our  institutions  of  learning  to  teach  these  sub- 
jects to  those  who  compose  the  masses,  who  produce 
and  consume,  has  resulted  in  our  wasteful  methods 
of  distribution.  It  is  necessary  that  these  subjects  be 
taught  to  those  who  are  to  be  the  agricultural  pro- 
ducers, and  to  those  who  are  to  be  the  urban  con- 
sumers of  the  future,  to  properly  equip  the  rising 
generation  for  the  duties  of  to-day  and  make  easier 
the  progress  of  the  future. 

It  has  been  the  purpose  in  these  pages  to  give  a 
work  suitable  for  the  class  room,  reference  library 
and  for  private  study. 

Sincerely  yours, 

T.  J.  BROOKS, 
A.  and  M.  College,  Mississippi. 


CONTENTS 


CHAPTER  PAGE 

I.     General  View 17 

II.      Commerce    22 

III.  Abstract  Brief  of  Conditions 33 

IV.  Agencies  Controlling  Price 43 

V.      Marketing  by  Manufacturers 50 

VI.      Marketing  by  Corporations 55 

VII.      Marketing  by  Wage-Earners 71 

VIII.      Marketing  by  the  Farmer 76 

IX.      Cotton  Exchanges 83 

X.     The  Grain  Exchanges 95 

XI.     Stock  Exchanges .  101 

XII.  Cooperative  Marketing  by  Farmers  112 

XIII.  Difficulties    in    the    Way    of    Co- 

operation      124 

XIV.  Legalized  Loyalty 133 

XV.  How   to   Organize    and   Operate   a 

Cooperative  Company    145 

XVI.  Finding  and  Holding  Customers  by 

Modern  Methods  of  Marketing  156 

XVII.     Selling  Fruits 163 

XVIII.      Cooperative  Dairies 168 

XIX.      Live  Stock:  Poultry 172 

XX.     Tobacco:  Peanuts   176 


CHAPTER  PAGE 

XXI.     Grain:  Cotton 180 

XXII.      Marketing  Perishable  Produce.  ...  189 

XXIII.  A   Division   of   Markets   Operated 

by  the  National  Government.  .  .  194 

XXIV.  International  Institute  of  Agriculture  2 1 3 
XXV.     Rural  Credits 217 

XXVI.      Rural  Credits  in  Europe 226 

XXVII.     Our  Banking  and  Currency  System.  244 

XXVIII.      Rural  Credits  in  the  United  States.  265 

XXIX.      Cost  of  Living 300 

XXX.      Cost  of  Living  (Continued) 308 

XXXI.     Cost  of  Living  (Concluded) 313 

XXXII.     Theories  of  Reform 319 

XXXIII.  Home  Ownership    329 

XXXIV.  The  Farmer  and  the  Soil 345 

APPENDIX 

PAGE 

General  Form  for  Cooperative  Marketing  As- 
sociation     355 

How  to  Organize  a  Cooperative  Creamery.  .  .  .  366 

By-Laws  for  an  Egg-Shipping  Association 374 

Another  General  Type  of  Organization 377 

Bibliography 3^T 

Opinions  of  Leading  Educators 385 

Superintendents  of  Education 393 

Amortization  Table 397 


OUTLINE  OF  CONTENTS 

PREFACE 

DEDICATION 

GENERAL  VIEW— CHAPTER  I. 

Definitions  and  discussions  of  certain  terms. 
Education :  relative  value  of  different  kinds. 
Intellectual.     Moral.     Physical. 
Science :  classified  knowledge. 
Market.     Price.     Value.     Commerce. 
Prosperity:  essentials. 

COMMERCE:    Importance  of— CHAP.  II. 
Its  influence  in  history  and 
Its  modern  development. 
CONDITIONS— CHAP.  III. 
Our  different  industries. 
Our  prosperity  classified. 
Fabulous  wealth  and  poverty :  a  paradox. 
AGENCIES  CONTROLLING  PRICE- 
CHAP  IV. 
The  law  of  price — 

Supply  and  demand. 

Trust. 

Speculation. 

What  insures  prosperity. 

Influence  of  standards  of  civilization. 


MARKETING  BY  MANUFACTURERS  AND 
WHOLESALERS— CHAP.  V. 

Effect  of  price  on  consumption. 
Effect  of  crowding  the  market. 
Manufacturer's  price  and  consumer's  price. 
Secrets  of  trade :  cost  of  selling. 
Methods  of  sale. 

Drummers.     Advertising.     Correspondence.     For- 
eign trade. 

MARKETING  BY  CORPORATIONS- 
CHAP.   VI. 
Selling  service. 
Selling  products. 

What  we  do  with  what  we  produce. 
Different  ways  of  squandering. 
Lessons  the  trusts  teach. 

Advantages  and  disadvantages  of  large  business. 
MARKETING  BY  WAGE-EARNERS— 

CHAP.  VII. 
Muscle  service. 
Brain  service. 
The  two  combined. 

\        The  conflict  between  capital  and  labor. 
%  MARKETING  BY  THE  FARMER- 
CHAP.  VIII. 
Old  methods — 

Home  production  and  home  consumption. 
The  Roman  farmer'?  fate. 
Over-urbanism. 
New  methods — 


EXCHANGES. 
COTTON  EXCHANGES— CHAP.  IX. 

Origin  and  development. 
The  functions  of  cotton  exchanges. 
Hedging. 

Gamblers  furnish  the  wide  market  for  hedgers. 
Bucket  shops. 
Exchange  vernacular — 

Futures,  basis  middling,  points,  corners,  hedging, 
scalping,  margin,  broker,  ticker,  tape,  pit,  off, 
on,  put,  call,  long,  short,  pull,  bear,  wringout, 
matched  sales,  bucketing  orders,  stop-loss  or- 
ders. 
Commissions — 

Where  the  market  for  cotton  begins. 
GRAIN  EXCHANGES— CHAP.  X. 
Our  largest  grain  exchange. 
If  future  dealing  on  margin  were  prohibited. 
The  carrying  function. 
When  the  farmer  comes  to  his  own. 
STOCK    EXCHANGES— CHAP.  XI. 
The  world's  large  stock  exchanges. 
Their  functions. 
The  question  of  incorporation. 
That  which  determines  the  price  of  stock. 
Wherein  stock  exchange  methods  differ  from  those 

of  cotton  and  grain  exchanges. 
Borrowing  stock. 
Partial  payments. 
Some  opinions  of  exchanges  by  eminent  men. 


^COOPERATIVE  MARKETING—CHAR  XII. 

Methods  and  degrees  of  cooperation. 

European  methods. 

American  methods. 
DIFFICULTIES  IN  THE  WAY— CHAP.  XIII. 

Working  capital. 

Deserting. 

Speculation. 

Too  many  things. 

Holding  and  losing. 

Place  hunters. 

Lack  of  common  interest. 

Dissatisfied  with  the  progress  made. 

Proper  attitude  toward  cooperation. 
LEGALIZED  LOYALTY— CHAP.  XIV. 

The  office  of  contracts. 

Examples  of  success  based  on  the  contract  agree- 
ment— 

Kentucky  tobacco  growers. 
California  fruit  growers. 

Oregon  fruit  growers. 
Georgia  fruit  growers. 
Florida  fruit  growers. 
Virginia  truck  growers. 
Grain  elevators. 

HOW  TO  ORGANIZE  AND  OPERATE  A  CO- 
OPERATIVE COMPANY— CHAP.  XV. 

Three  kinds  of  corporations. 

The  methods  of  each. 

Details  of  incorporating. 

Different  ways  of  using  incomes 


FINDING  AND  HOLDING  CUSTOMERS- 
CHAP.  XVI. 

The  art  of  salesmanship. 
Different  ways  of  reaching  customers. 
Creating  demand. 

Why  we  have  not  a  larger  share  of  the  Latin- 
American  trade. 
SELLING  FRUITS— CHAP.  XVII. 

Examples  from  the  Pacific  slope, 
i       Examples  from  Georgia  and  Florida. 

*  MARKETING  DAIRY  PRODUCTS  COOPER- 

ATIVELY—CHAP. XVIII. 
Creameries. 
Cheese  factories. 
Local  factories. 
Centralizers. 

*  MARKETING  LIVE  STOCK  AND  POULTRY 

CHAP.  XIX. 
Least  expensive  to  start. 

^MARKETING  TOBACCO  AND  PEANUTS- 
CHAP.  XX. 
Simple  rules. 

Experience  in  collective  methods. 
Reasons  for  successes  and  failures. 
*  GRAIN  ELEVATORS  AND  COTTON  WARE- 
HOUSES—CHAP. XXI. 
Struggles  of  cooperative  elevators. 
The  only  way  to  succeed. 
The  only  way  of  marketing  cotton. 
The  warehouse  system. 
Successes  and  failures  and  why. 


MARKETING    PERISHABLE    PRODUCE- 
CHAP.  XXII. 

Extent  and  value  of  truck  farming. 
East  Shore  Virginia  Produce  Exchange. 
Other  examples. 

OFFICE  OF  MARKETS   IN  THE  DEPART- 
MENT OF  AGRICULTURE- 
CHAP.      XXIII. 

Its  origin.     Its  needs.     Its  functions. 
Its  relation  to  employment  bureaus. 
Its  possibilities. 

INTERNATIONAL    INSTITUTE    OF   AGRI- 
CULTURE—CHAP. XXIV. 
Inception. 
Scope  of  work. 

RURAL  CREDITS— CHAP.  XXV. 
Principles  involved. 
Purpose  and  functions. 

COOPERATIVE  BANKING  IN  EUROPE- 
CHAP.  XXVI. 
German  systems — 
Schulze-Delitzsch. 
Raiffeisen. 
Landschaften. 
French  systems — 
Credit  Foncier. 
Credit  Agricole. 

OUR  BANKING  AND  CURRENCY  SYSTEM 

CHAP.  XXVII. 
Faults  of  the  old  system. 
National  banks. 


State  banks. 

Private  banks. 

Provisions  of  the  new  law. 

Volume  of  money  in  countries  of  the  world. 
RURAL  CREDITS  IN  THE  UNITED  STATES 

CHAP.  XXVIII. 

Movements  leading  up  to  passage  of  bill. 

Features  of  the  "Commission's  bill." 

Criticisms. 

Special  needs  of  agriculture. 

Fundamentals. 

Most  prosperous  section. 

Government   aid   vs.    private    initiative    and    self- 
help. 

Examples  of  government  aid  to  home-ownership. 
COST  OF  LIVING- 
CHAPS.  XXIX,  XXX,  XXXI. 

Fundamentals  in  economics. 

Relation  of  rise  and  fall  of  price  and  cost  of  living. 

Factors  regulating  price. 

Economic  waste. 

Parasites — Idle.    Industrious. 

Squandering. 

International  factors  regulating  price. 
THEORIES   OF    REFORM— CHAP.    XXXII. 

Views  of  leading  thinkers. 

Anarchy.     Communism.    Single  tax. 

Socialism.     Syndicalism.     Voluntary  cooperation. 
HOME   OWNERSHIP— CHAP.   XXXIII. 

Land  monopoly. 


Alien  ownership. 

Struggles  at  home  and  abroad. 

Conditions  prophesies  of  what  will  follow. 
THE  FARMER  AND  THE  SOIL- 
CHAP.  XXXIV. 

Conditions  most  conducive  to  the  greatest  develop- 
ment. 

Results  of  impoverishing  the  soil. 

The  problem  we  must  solve. 

Most  important  products  of  the  farm. 

Other  things,  incidents,  and  means  to  an  end. 

Training  brains  and  soil. 

Greatest  service. 

Worthy  life. 
APPENOIXV 

General  form  for  Cooperative  Association. 

How  to  organize  a  Cooperative  Creamery. 

By-Laws  for  egg-shipping  association. 

General  type  of  organization  rules. 

Bibliography. 

Opinions  of  leading  educators. 


CHAPTER  I 

GENERAL  VIEW 

IN  beginning  the  study  of  a  subject  it  is  well  to 
get  acquainted  with  the  terms  used  and  the  pur- 
pose to  be  served  by  the  knowledge  sought. 

There  are  numberless  definitions  of  education.  To 
be  educated  is  to  be  equipped  for  life's  work.  The 
better  the  equipment  the  better  the  education.  Edu- 
cation has  no  iron-clad  metes  and  bounds.  We  differ 
only  in  degree,  as  none  ever  reach  the  limit  of  com- 
plete knowledge  in  the  various  realms  of  investiga- 
tion. I  would  say  that  education  is  such  a  qualifica- 
tion as  will  enable  one  to  accomplish  the  most  for 
one's  self  and  be  of  the  greatest  possible  benefit  to 
mankind.  It  is  composed  of  knowledge,  discipline 
and  culture,  and  is  obtained  by  judiciously  de- 
veloping the  forces  and  capacities  with  which  one 
is  endowed. 

The  degree  of  success  achieved  is  determined  by 
the  relationship  between  the  individual  and  his  en- 
vironment. The  value  of  any  branch  of  knowledge 
is  measured  by  its  relation  to  human  needs.  The 
relative  value  of  a  given  course  of  study  to  the  one 
pursuing  it  is  solely  a  question  of  the  powers  and 
aptitudes  of  the  student.  The  relative  value  of  a 
science  or  an  art  to  society  is  determined  by  the 
needs  of  society  and  the  relative  utility  of  the  science 


1 8  Markets    and   Rural   Economics 

or  art.  There  is  such  a  thing  as  knowledge  being 
possessed  when  there  is  no  opportunity  for  its  use. 
And  an  opportunity  to  one  is  not  necessarily  an 
opportunity  to  another,  because  of  a  difference  in  the 
relationship  of  the  individuals  to  their  surroundings. 

To  classify  education  as  intellectual,  moral  and 
physical,  the  subject  matter  of  this  work  would  come 
under  the  head  of  intellectual.  The  basis  of  all 
progress  is  intellect.  The  purpose  of  knowledge  is 
served  when  applied;  and  the  purpose  in  studying 
Markets,  the  Science  of  Commerce  and  the  Economics 
of  Distribution,  is  to  enable  society  to  profit  by  the 
application  of  the  knowledge  secured. 

Science  is  classified  knowledge.  Every  branch  of 
study  has  its  science.  Classified  error  never  makes 
a  science.  Knowledge  capable  of  being  classified 
becomes  a  science,  and  skill  in  utilizing  the  knowl- 
edge becomes  an  art.  Surely  there  is  knowledge  of 
markets,  commerce  and  economics  sufficient  to  justify 
a  course  covering  these  subjects. 

A  market  is  a  place  of  exchange;  marketing  is 
the  transaction  itself.  Buyin'g  and  selling  is  marketing, 
and  constitutes  the  commercial  business  of  the  world. 
Without  it  there  would  be  no  industries  in  the  mod- 
ern sense,  and  business  would  lapse  back  to  that  of 
the  savage. 

Price  is  the  commercial  value  when  sold;  or  the 
amount  asked  before  sold;  or  the  quotation. 

Value  is  human  estimation  measured  in  units  of 
account.  It  may  be  based  on  sale  value,  utility  value, 
or  keepsake  value. 

Commerce  is  exchange  or  interchange  of  property, 
or  title  to  same,  between  individuals  or  nations.  It 
is  carried  on  by  money,  barter,  or  balancing  accounts. 

Prosperity   means    advance    or   gain-  in    anything 


Markets   and   Rural   Economics  19 

desirable.     It  implies  net  gain,  a  surplus  production, 
or  profit. 

Equity  is  the  giving  to  each  according  to  his  due. 
Tb  establish  economic  justice  is  the  most  difficult  of 
social  problems.  As  judgments  and  consciences  differ, 
so  do  men  differ  as  to  what  is  due  to  each,  or  what 
constitutes  a  just  recompense.  Conscience  is  too  oft 
warped  by  selfishness  and  disregard  for  others  to  be 
trusted  far  when  self-interest  is  at  stake.  The  selfish 
use  of  power  has  brought  the  world's  revolutions. 
Majorities  have  fought  the  tyranny  of  minorities  and 
minorities  have  fought  the  tyranny  of  majorities. 
Popular  conceptions  of  equity  are  reflected  in  the  laws 
of  nations  and  the  condition  of  the  people.  Here  is 
the  task  of  statesmanship,  and  the  call  for  popular 
statesmanship  is  world-wide. 

It  is  estimated  that  twenty  billion  people  have 
been  in  this  world,  and  one  and  a  half  billion  are 
here  now.  We  are  particularly  interested  in  the  95 
million  who  reside  in  the  United  States  of  America, 
and  in  certain  questions  concerning  their  welfare. 

There  has  always  been,  in  every  age  of  the  world, 
the  worker  and  the  shirker,  the  producer  and  the 
parasite.  One  of  the  ends  of  government  is  to  pre- 
vent the  increase  of  parasitism  and  to  destroy  it  as 
nearly  as  possible.  The  nation  that  encourages  para- 
sitism, and  becomes  subject  to  the  will  and  authority  , 
of  parasites,  is  inviting  its  own  destruction.  One 
of  the  duties  of  society  is  to  obviate  waste  in  produc- 
tion and  distribution.  This  is  not  so  much  a  govern- 
ment task  as  it  is  an  industrial  and  commercial  task. 
Under  this  head  come  Markets,  Agricultural  Eco- 
nomics, Commerce  and  Distribution.  All  the  energies 
and  powers  of  mankind  are  needed  to  be  applied  effec- 
tively and  not  wastefully.  The  destiny  of  the  human 


2O  Markets    and   Rural   Economics 

race  for  all  the  ages  to  come  is  more  in  the  keeping 
of  the  people  of  the  United  States  of  America  than 
of  any  other  nation  in  the  world.  For  this  reason, 
viewed  as  a  world  citizen,  the  individual  responsi- 
bility of  the  citizen  of  this  country  is  greater  than 
that  of  the  citizens  of  any  other  country,  and  his. 
privileges  and  opportunities  are  correspondingly 
greater.  The  fate  of  this  experiment  in  the  Repub- 
lican form  of  Democracy  has  more  to  do  with  the 
future  history  of  the  race  than  the  fate  of  any  other 
sovereignty  of  the  earth.  There  are  subjects  needed 
to  be  understood  not  taught  in  our  institutions  of 
learning.  There  are  problems  to  solve  that  the  big 
political  parties  are  not  attempting  to  solve.  There 
are  things  for  the  farmer  to  do  which  do  not  concern 
production.  There  are  issues  to  face  with  which  the 
average  citizen  is  not  familiar.  To  aid  in  the  work 
needed  to  be  done  in  preparing  for  these  duties  and 
opportunities  is  the  object  of  this  volume. 

LESSON  I 

Give  a  definition  of  Education. 

Is  one's  education  ever  completed? 

Of  what  is  it  composed,  how  obtained,  and  what 
is  its  purpose? 

How  would  you  judge  the  value  of  a  branch  of 
knowledge  ? 

What  would  you  designate  as  included  in  the  words 
"human  needs"? 

How  would  you  judge  relative  utility? 

To  classify  education  as  intellectual,  moral  and 
physical,  under  which  head  would  you  place  the  sub- 
ject we  are  studying? 


Markets   and  Rural   Economics  21 

What  is  the  moving  cause  of  all  progress  and  the 
purpose  of  knowledge? 

What  is  the  purpose  of  acquiring  knowledge  of 
the  Economics  of  Distribution? 

Define  Market. 

Define  Price. 

Define  Value. 

Define  Commerce. 

Define  Prosperity. 

Define  Equity. 

Define  Production. 

Define  Distribution. 

Distinguish  between  Equity,  Economy  and  Fru- 
gality. 

Industrially  speaking,  what  two  general  classes 
have  always  been  in  the  world? 

Whose  duty  is  it  to  avoid  waste? 

What  people  do  you  believe  have  the  destiny  of 
the  world  in  their  keeping  more  than  any  other? 
Why? 

Do  you  take  any  pride  in  the  fact  that  you  can 
help  determine  the  course  of  history? 


CHAPTER  II 

COMMERCE  : 

ITS    INFLUENCE    ON    THE    RISE    AND    FALL    OF 
NATIONS 

Master  of  Human  Destiny;  Kingdom,  Empires  and 

Republics  Made  and  Unmade  by  the  Shifting 

Currents  of  Trade;  Control  of  Commerce 

the  Key  to  the  Future. 

Most  of  the  wars  of  history  have  been  struggles 
for  commercial  supremacy.  Advantage  or  disadvan- 
tage in  trade  has  determined  the  fate  of  nations  in 
all  ages.  Read  the  history  of  the  world  and  when- 
ever you  find  a  rich  and  powerful  nation,  you  will 
also  find  that  its  opulence  came,  not  only  from  pro- 
duction, but  either  from  extorting  tribute  from  con- 
quered peoples,  or  through  commerce — generally 
both.  Give  to  any  country  the  exclusive  control  of 
the  trade  between  the  temperate  and  tropical  zones, 
and  it  will  soon  tower  above  all  other  countries  in 
point  of  wealth,  thrift  and  power,  notwithstanding 
it  appears  that  Goldsmith  has  truly  sung, 

uWhere    wealth    and    freedom    reign,    contentment 

fails, 
And  honor  sinks  where  commerce  long  prevails. " 


Markets  and  Rural  Economics  23 

In  worldly  matters,  self-interest  controls  the  af- 
fairs of  men,  and  merchants  of  any  kind  generally 
charge  for  their  services  all  that  the  sucessful  opera- 
tion of  their  business  will  permit.  This  being  so, 
deceit  and  fraud  soon  creep  in  to  fill  out  deficits  in 
corporate  revenue  and  keep  up  the  profit  column  in 
the  ledger  of  trade.  Commerce  has  builded  civiliza- 
tions and  its  abuse  has  wrought  their  ruin.  Let  us 
notice  a  few  examples. 

In  the  eastern  hemisphere  those  who  have  carried 
on  the  trade  between  Europe  and  India,  have  been 
the  great  commercial  magnates  of  the  earth.-  In 
ancient  times,  the  Phoenicians  possessed  it  for  two 
thousand  years,  and  it  made  them  the  great  wealth 
kings  of  the  East.  But  their  very  wealth  and  great- 
ness excited  the  cupidity  of  others,  and  in  turn, 
Assyria,  Babylon,  Persia,  Egypt,  Greece  and  Rome 
conquered  and  possessed  their  lands.  But,  being 
wholly  a  commercial  people,  they  cared  little  who 
conducted  their  political  affairs  or  collected  and  ex- 
pended the  taxes  they  could  so  easily  pay.  To  the 
Phoenicians  the  Mediterranean  served  merely  as  a 
roadway  over  which  they  went  to  seek  fortune  and 
honor.  They  were  bold  seamen  and  penetrated  to 
the  most  distant  coasts,  from  the  North  sea  to  the 
Indian  oceans,  and  it  is  thought  by  some,  traded  with 
Oceanica  and  even  South  America  and  Mexico,  to 
whose  Aztec  civilization  their  records  seem  to  allude. 

Phoenicia  included  what  at  present  is  the  Holy 
Land,  or  Palestine,  which  is  preeminently  a  land  of 
.hills  and  valleys,  rough  and  jagged,  one  of  the  most 
broken  regions  on  earth  that  is  cultivated,  a  kind  of 
exploded  desert,  and  yet  this  country  possessed  the 
famous  cities  of  Tyre  and  Sidon,  whose  splendor 
and  population  far  exceeded  any  other  cities  of  the 


24  Markets  and  Rural  Economics 

Levant.  Their  commerce  extended  East  to  China, 
and  westward  to  all  the  lands  of  Europe  and  in- 
cluded central  and  western  Africa. 

Tyre  was  founded  by  the  Sidonians  at  a  period 
so  remote  that  the  date  lies  hidden  behind  the  thick 
mist  of  centuries,  but  in  the  time  of  Ezekiel  and 
Isaiah,  she  was  "the  stronghold  of  the  sea,"  and 
ua  glowing  picture  of  splendor  and  maritime  power." 

Sidon  was  a  sister  to  Tyre,  situated  only  twenty 
miles  to  the  North,  whose  power  was  greatest  about 
1 5  centuries  before  Christ,  during  a  period  when 
Egypt  held  supremacy  over  Phoenicia.  It  fell  into 
the  hands  of  the  Persians,  who  destroyed  it,  about  five 
centuries  before  Christ.  Tyre  -was  destroyed  by 
Alexander  the  Gr'eat,  332  B.  C.;  she  had  withstood 
the  assaults  of  Shalmaneser  and  Nebuchadnezzar 
with  their  million  men,  and  against  her  fortifications 
the  Assyrians  thundered  in  vain.  But  her  fall  was 
complete.  Today  the  relics  of  her  splendor  are 
beneath  the  restless  sea.  Back  from  the  shore  are 
still  seen  some  of  the  rock-hewn  tombs  of  those  who 
once  knew  the  mistress  of  the  sea  in  her  magnificence. 

The  history  of  Tyre  and  Sidon  with  small  differ- 
ence is  the  history  of  other  cities  of  Phoenicia,  such 
as  Sparta,  Antioch,  Gabal,  Beyrout,  Dor,  Accho, 
and  later  Caesarea.  Why  this  breaking  down  of  the 
Phoenician  strongholds?  Because  of  the  shifting  of 
the  current  of  commerce.  The  conquests  of  Nebuch- 
adnezzar, the  founder  of  Babylon,  were  to  obtain 
possession  of  this  commerce.  He  carried  the  traffic 
to  Babylon,  and  up  the  Euphrates  across  Syria  and 
Asia  Minor,  and  gave  the  Western  end  of  traffic  to 
the  Lydians,  and  Ionian  Greeks.  This  awakened 
the  Greeks  from  their  lethargy  of  barbarism  and 


Markets   and   Rural   Economics  25 

gave  them  a  grand  start  upon  their  career  of  civili- 
zation. 

The  power  of  the  Assyrian  empire  was  very  largely 
based  upon  the  possession  of  the  eastern  end  of  this 
commerce;  the  conquest  along  the  Mediterranean 
having  broken  up  the  old  line  of  trade  by  way  of 
the  Red  Sea. 

Carthage  might  be  called  an  offspring  of  Tyre. 
It  possessed  a  goodly  part  of  the  traffic  between 
Africa,  Asia  and  Western  Europe.  This  city  dis- 
puted in  arms  the  mastery  of  the  known  world. 

She  was  the  ancient  rival  of  Rome,  with  which  war 
prevailed  intermittently  for  nearly  seventy-five  years. 
It  is  related  of  Cato,  the  Wise,  that  upon  a  visit  to 
Carthage,  observing  the  haughty  and  intolerant  dis- 
position of  the  Carthaginians  toward  the  people  of 
his  own  country,  he  returned  to  his  place  in  the  Senate 
of  Rome,  and  ever  afterwards  closed  his  speeches, 
upon  no  matter  what  subject,  with  the  statement, 
uCarthage  must  be  destroyed."  This  was  because 
Cato  knew  that  if  Rome  did  not  destroy  Carthage, 
Carthage  would  destroy  Rome.  Rome  finally  de- 
stroyed Carthage  in  the  last  Punic  war,  146  B.  C., 
under  the  generalship  of  Scipio's  adopted  son,  Amili- 
anus  Africanus,  almost  as  distinguished  a  general  as 
the  conqueror  of  Hannibal. 

It  was  the  Roman  policy  to  divide  and  conquer, 
but  also  to  leave  to  the  vanquished  their  own  customs 
and  laws,  and  to  exact  merely  tribute  and  supremacy. 
So  it  mattered  little  where  the  great  marts  were 
located,  Rome  was  sure  of  a  division  of  the  profits. 
Away  back  one  thousand  years  before  the  Christian 
era,  when  Egypt,  Assyria,  Chaldaea,  Babylon,  and  the 
Hebrews  were  the  governmental  powers  of  the  earth, 
the  Jews  enjoyed  the  greater  portion  of  this  enormous 


26  Markets    and   Rural   Economics 

trade.  The  Israelites  are  noted  for  their  shrewdness 
as  merchants  and  money  manipulators.  It  so  en- 
riched them  that,  it  is  said,  usilver  was  in  Jerusalem 
as  stones."  The  development  of  this  commerce  was 
the  sphere  in  which  was  displayed  much  of  the  pro- 
verbial wisdom  of  King  Solomon,  and  it  constituted 
the  chief  glory  of  his  reign.  But  when  Solomon's 
reign  was  ended  by  his  death,  there  was  no  other 
man  who  could  so  magnetize  the  world  as  had  he, 
so  his  kingdom  divided  and — 

uThe  Assyrian  came  down  like  a  wolf  on  the  fold, 
And  his  cohorts  were  gleaming  in  purple  and  gold." 
Thus  Israel  was  led  captive.  Nineveh  was  the 
Assyrian  capital — though  many  historians  say  Dam- 
ascus, "The  eye  of  the  East,"  was  formerly  the 
capital  of  all  Syria.  Here  they  gathered  the  spoils 
of  many  countries.  Their  innumerable  castles  and 
palaces  have  been  the  theme  of  poets  and  search- 
fields  of  antiquarians,  rivalling  in  interest,  Memphis, 
Thebes,  Luxor  and  Karnak  of  Egypt. 

The  Persian  monarchy  under  Cyrus  overthrew 
Syria,  and  under  this  king  Babylon  fell  to  rise  no 
more. 

Time  was  when  the  Arabians  shared  with  the 
Phoenicians  the  carrying  trade  of  the  then  known 
world.  Later,  when  Venice  was  at  the  height  of 
its  magnificence  and  glory,  when  Portugal  was  no 
petty  province,  but  a  nation  of  hardy  and  adventurous 
people;  when  the  Dutch,  with  their  quiet  but  per- 
sistent enterprise,  were  claiming  at  least  their  share 
of  the  world's  prosperity,  the  Arabs  succeeded  in 
controlling  the  trade  between  Europe  and  India. 
The  commercial  ability  displayed  by  these  people  was 
equal  to  their  invincibility,  and  the  vast  returns  made 


Markets   and   Rural   Economics  27 

to  their  merchant  princes  were  expended  as  munifi- 
cently as  even  in  the  days  when  the  ships  of  the 
world  found  their  entry  port  in  Venice.  In  the  time 
of  their  greatest  prosperity,  the  most  beautiful  and 
extravagant  palaces  were  erected. 

A  few  individuals  obtained  a  charter  for  an  East 
India  Trading  Company  from  the  Dutch  Govern- 
ment, in  the  year  1602,  with  "the  exclusive  right  to 
commerce  beyond  the  cape  of  Good  Hope,  on  the 
one  side,  and  beyond  the  straits  of  Magellan  on  the 
other." 

There  was  also  a  Dutch  West  India  Company, 
chartered  in  1621,  which  was  almost  as  great  a 
monopoly.  Its  patent  prohibited  any  person  from 
sailing  to  the  coast  of  Africa  or  America  except  in 
the  company's  service.  It  exercised  all  governmental 
powers  over  the  colonies  it  established.  One  clause 
in  its  charter  was  that  "they  must  advance  peopling 
of  those  fruitful  and  unsettled  parts."  It  established 
a  colony  on  the  shores  of  the  Hudson  river  in  1622. 
In  1664,  during  the  war  between  England  and  Hol- 
land, the  English  took  possession  of  these  regions. 
It  must  be  remembered  that  the  Dutch  republic, 
lately  freed  from  Spain,  was  during  the  iyth  century 
the  foremost  maritime  nation  on  the  globe.  Its  trad- 
ing stations  were  scattered  along  the  islands  and 
coasts  of  Asia,  and  its  ships  penetrated  the  remotest 
seas.  The  Hudson  Bay  Company  was  chartered  by 
Charles  II  in  1670,  and  was  a  factor  in  commerce 
down  to  our  time. 

It  was  commercial  jealousy  that  caused  the  English 
parliament  to  pass  acts  offensive  to  the  colonies.  Over 
greed  for  commercial  domination  brought  on  the 
revolution  and  lost  England  her  Western  Empire. 


28  Markets    and   Rural   Economics 

But  the  lesson  she  learned  kept  for  Britain  her  other 
foreign  possessions. 

f     Even  now  the  need  for  markets  dictates  terms  of 
/peace  and  war. 

The  control  of  the  sea  passed  completely  into  the 
hands  of  England  after  the  battle  of  Trafalgar.  Then 
followed  Napoleon's  continental  blockade,  and  the 
Emperor's  decrees  and  British  orders  in  council  be- 
tween them  made  neutral  commerce  hazardous. 

Owing  to  the  English  supremacy  at  sea,  Napoleon 
strove  to  make  France  economically  independent. 
This  was  the  origin  of  the  beet-sugar  industry  in 
France,  which  reached  in  1910  a  million  tons. 

What  has  made  the  great  cities  of  the  world? 
What  is  it  that  keeps  the  pulsebeat  and  heartthrob 
of  industry  going?  What  is  the  power  behind  the 
throne  in  the  world's  affairs? 

Two  words  tell  it — production  and  commerce. 

The  panorama  of  history  follows  its  currents; 
power  in  the  comity  of  nations  is  measured  in 
the  clearing-houses.  The  rise  and  fall,  development 
and  decay,  triumph  and  defeat  of  nations  and  insti- 
tutions crowd  each  other  in  rapid  succession  from  the 
title  page  to  finis  of  history's  ponderous  tome,  rich 
with  the  spoils  of  time.  Are  we  today  building 
permanently? 

Egypt  thought  she  had  secured  permanency.  Drunk 
with  dominion  she  gloated  in  her  supremacy,  wasted 
and  brutalized  the  lives  of  myriads  of  whip-lashed 
slaves  to  rear  pyramids  to  the  vanity  of  the  Pharaohs; 
but  the  hundred  gates  of  Thebes  have  crumbled  and 
her  tombs  lost  to  the  dust  they  were  built  to  com- 
memorate; and  Egypt  is  the  pawn  of  men  whose 
progenitors  wore  skins,  fought  with  clubs,  and  lived 


Markets   and   Rural   Economics  29 

in  caves  when  the  Ptolomies  wore  woven  robes  and 
world,"  uthe  cradle  of  learning."  She  built  beauti- 

So  thought  Greece,   the   "darling  of  the   ancient 
bore  glittering  blades. 

fully.  The  treasuries  of  nations  gilded  her  domes 
and  made  her  ruffled  peninsulas  an  enchanted  realm. 
The  shores  of  the  Bosphorus  rang  with  the  peans 
of  Byzantium,  a  mart  of  power,  and  Athens  the 
capital  city  was  a  wilderness  of  marble.  Art,  elo- 
quence, philosophy,  generalship,  heroism,  culture,  lit- 
erature and  glory  found  in  her  a  patron  and  sought 
her  encircling  arms.  Was  she  not  builded  for  all 
time  to  come?  Yet,  in  solemn  awe,  we  gaze  upon 
the  jumbled  stoneheaps  on  the  Athenian  hills ! 

So  thought  Rome.  She  answered  the  ucosmic 
urge,"  founded,  built,  conquered,  ruled — debauched 
and  died.  She  took  charge  of  the  progress  of  the 
world,  carried  it  forward  to  heights  hitherto  un- 
known— and  tossed  it  into  the  sea.  Rome  is  the 
tomb  of  the  progress  of  a  continent  and  the  culminant 
civilization  of  four  thousand  years — the  light  of  ages 
whose  chiefs,  scholars,  and  men  of  iron  are  yet  the 
fount  at  which  the  panting  mind  may  drink  deeply. 
Mother  of  dead  empires,  whose  broken  thrones  and 
temples  shelter  'neath  the  cypress,  the  haunt  of  the 
owl  and  the  bat!  The  dust  of  her  sepulchres  scat- 
tered long  ago.  Crumbled  works  of  genius  mark  the 
graves  of  a  world — a  mirage  of  ruin. 

Feudalism  built  castles  all  over  Europe  to  stand 
the  wreck  of  time,  and  from  which  the  world  was  to 
be  governed.  The  feudal  lords  built  these  castles 
and  held  sycophant  monarchs  as  proteges  of  their 
bureaucratic  power,  planned  for  a  thousand  years, 
ruled  by  force,  gloated  in  their  pitiless  pride  over  the 
vanquished,  and  reveled  in  the  wealth  and  luxu- 


30  Markets    and   Rural   Economics 

ries  of  spoiliation,  till  young  democracy  brandished 
the  sword  of  revolt  and  defiance,  and  the  earth  trem- 
bled with  the  march  of  militant  feet.  Some  of  these 
castles  stand  yet,  stern  and  quiet  against  the  sky. 
No  echoes  of  the  chieftain's  footfall  sound  in  the 
big  halls  that  once  resounded  with  merriment  and 
acclaims,  when  festivities  crowded  them  with  those 
in  power.  Grass  grows  between  the  stones  and  bats 
fly  at  night  where  royalty  once  reveled  and  planned 
to  tax  and  plunder,  as  I  have  witnessed. 

Lack  of  proper  conservation  of  resources  and  just 
administration  of  government  will  bring  the  same 
results  now  they  brought  in  the  days  of  old.  To  be 
unmindful  of  the  law  of  recompense  is  to  defy  fate 
and  be  cast  into  the  junk-heap.  uThe  ruins  of  Amer- 
ica" may  some  time  attest  our  folly  and  lack  of 
statesmanship. 

With  the  application  of  machinery  to  modern  in- 
dustry came  a  rapid  evolution  in  the  methods  of  com- 
merce. The  classification  and  segregation  of  indus- 
trial pursuits  necessitated  an  increase  of  exchange 
even  with  the  same  amount  produced  and  consumed. 
This  was  due  to  the  fact  that  no  one  produced  all 
he  needed  to  consume  but  produced  more  of  some- 
thing than  he  consumed.  For  farmers  to  be  pros- 
perous under  the  old  regime  it  was  only  necessary 
that  they  produce  abundant  harvests  of  the  ordinary 
articles  of  consumption.  The  surplus  sold  was  mostly 
bartered,  and  little  net  profit  in  money  was  neces- 
sary. Clothes  were  made  at  home,  and  food  deli- 
cacies, elaborate  home  equipments,  extensive  farm 
machinery  were  not  in  vogue.  The  need  for  a  money 
crop  to  market  in  order  to  purchase  the  products 
of  factories  and  of  other  lands  had  not  been  devel- 
oped. But,  with  the  changes  wrought  by  the  rapid 


Markets   and   Rural   Economics  31 

increase  in  the  use  of  machinery  in  every  department 
of  industry,  commerce  expanded  as  never  before  in 
the  history  of  the  world.  This  brought  a  new  phase 
to  the  business  of  farming:  Production  was  not  all 
the  battle,  exchanging  at  a  net  profit  was  the  new 
task.  Without  net  profits  there  could  be  no  accumu- 
lation and  material  progress. 

One  producer  of  the  useful  things  of  life  is  not 
relatively  of  more  value  than  another.  Often  men 
of  ability  work  at  things  that  are  of  no  economic 
value  to  society  and  are  in  a  sense  useless.  If  life 
had  no  purpose  beyond  personal  gratification  social 
questions  would  not  be  worth  discussing. 

It  is  one  thing  to  see  the  ulost  motion"  in  a  system 
of  business  and  quite  another  task  to  eliminate  the 
useless  friction.  The  economic  pressure  now  mani- 
festing itself  so  sensibly  is  demanding  of  society  a 
readjustment  of  some  of  the  machinery  of  distribu- 
tion. 


LESSON  II 

What  can  you  say  as  to  the  importance  of  com- 
merce ? 

What  can  you  say  of  its  influence  in  history? 

In  Ancient  times? 

During  the  Middle  Ages? 

In  Modern  times? 

Name  some  wars  that  were  brought  on  by  rivalry 
of  nations  struggling  for  commercial  supremacy. 

In  Asia. 

In  Africa. 

In  Europe. 

In  America. 


32  Markets    and   Rural   Economics 

Give  some  special  features  of  the  modern  develop- 
ment of  commerce. 

What  essential  difference  in  requirements  of  pros- 
perous farming  now  and  formerly? 

To  what  is  due  the  remarkable  changes  in  methods 
of  distribution? 

What  have  you  to  say  of  the  relative  importance 
of  inventors  to  other  useful  workers? 

Are  the  smartest  people  always  the  most  useful? 

Are  the  best  educated  people  always  the  most  use- 
ful? 

Does  it  make  any  difference  whether  or  not  one  is 
of  any  use  to  his  f ellowmen  ? 

What  is  the  purpose  of  life  beyond  individual  grati- 
fication? 

Do  you  see  any  ulost  motion"  in  present  methods 
of  distribution? 

If  so,  where? 

Do  you  see  any  efforts  to  remedy  it?  If  so,  give 
instances. 


CHAPTER  III 

ABSTRACT  BRIEF  OF  CONDITIONS 

As  a  basis  for  a  comprehensive  understanding  of 
our  subject  it  is  necessary  to  get  a  reliable  statement 
of  conditions  as  they  exist.  Taking  as  authority  Sta- 
tistical Abstract  Number  Thirty-four,  issued  by  the 
Bureau  of  Statistics,  Washington,  D.  C.,  we  find  that 
according  to  the  census  of  1910  we  had  in  continental 
United  States  91,972,266  inhabitants;  designated  as 
urban  42,623,383;  as  rural  49,348,883.  Population 
over  ten  years  of  age  engaged  in  gainful  occupation, 
51,060,500.  These  are  made  up  of  workers  desig- 
nated under  five  headings : 

Manufacturing  and  Mechanical.  .  .  .29,073,233 

Agricultural 10,381,765 

Domestic  and  personal  service 5,580,000 

Trade  and  transportation 4,766,964 

Professional  service 1,258,538 

Of  the  total  number  of  inhabitants  of  47,332,122 
were  males  and  44,640,144  were  females.  The  na- 
tive white  of  native  parentage  were  49,488,441 ; 
native  white  of  foreign  parentage,  18,900,663;  for- 
eign white,  13,343,583;  Negroes,  9,828,294;  Indi- 
ans, 265,683;  Chinese,  70,944;  Japanese,  71,722; 
all  others,  2,936. 

These  and  their  descendants  are  the  people  we 
have  to  deal  with  and  who  constitute  this  Republic. 


34  Markets    and   Rural   Economics 

It  depends  upon  the  kind  of  people  that  are  involved 
as  to  what  may  be  expected  to  be  accomplished. 

At  the  beginning  of  the  government  90  per  cent, 
of  both  wealth  and  population  was  rural.  By  1860, 
at  the  beginning  of  the  Civil  War,  the  farmers  owned 
only  50  per  cent,  of  the  total  wealth.  By  1900  they 
owned  scarcely  more  than  25  per  cent,  of  the  total 
wealth.  This  decrease  in  the  percentage  of  the  total 
wealth  owned  by  the  farmer  was  not  due  so  much 
to  his  losing  his  ground  as  a  property  owner  as  to 
the  development  of  other  industries  in  a  greater  ratio 
than  at  any  other  period  in  the  history  of  the  world. 
Manufacturing,  mining,  railroads,  and  commercial 
wealth  increased  so  enormously  as  to  forge  ahead 
of  agriculture  with  astonishing  rapidity. 

In  1900  the  total  value  of  all  farm  property  was 
$20,439,901,164;  in  1910  it  had  reached  $40,991,- 
000,090.  This  sudden  increase  in  the  value  of  farm 
property  was  not  due  to  increase  in  intrinsic  wealth 
so  much  as  to  increment  due  to  inflation  of  land 
values.  The  productive  power  had  not  increased  at 
the  same  ratio  nor  had  farming  paid  as  large  per  cent, 
on  investment  as  the  other  leading  vocations. 

From  1890  to  1900  the  farmers  of  the  United 
States  produced,  in  round  numbers,  $40,000,000,000 
worth  of  farm  products.  There  was  an  average  of 
9,000,000  engaged  in  agriculture.  They  had  on  an 
average  of  $18,250,000,000  worth  of  farm  property 
in  operation  each  year.  And  their  net  gain  for  these 
ten  years,  was  $132,000,000.  This  is  $1.58  per  year, 
or  $15.80  for  ten  years'  work  for  each  man  engaged. 

Present  estimate  of  the  total  wealth  of  the  country 
is  approximately  $140,000,000,000.  Of  this  amount 
$40,000,000,000  is  agricultural;  $14,000,000,000 
of  this  belongs  to  other  than  farmers.  The  total 


Markets   and   Rural   Economics  35 

value  of  all  property  in  1904  was  $103,104,211,917. 
From  these  figures  it  is  plain  that  farm  property  had 
responded  to  inflation  more  rapidly  during  the  first 
decade  of  the  century  than  had  other  property.  How- 
ever, we  find  from  consulting  the  same  source  of  sta- 
tistics that  the  value  of  the  products  of  manufactures 
increased  40  per  cent,  from  1904  to  1910,  due  mainly 
to  increase  of  output,  although  the  cost  of  material 
has  increased  at  as  great  a  percentage  as  the  value 
of  the  products. 

The  Thirteenth  United  States  Census  shows  a 
growth  of  40  per  cent,  in  the  value  of  the  products 
of  manufactures  in  the  United  States  between  1904 
and  1909.  The  total  in  the  former  year  was  $14,- 
793,903,000  and  in  the  latter  $20,672,052,000.  In 
producing  this  amount  the  value  of  the  materials  used 
rose  from  $8,500,208,000  to  $12,141,291,000,  an 
increase  of  43  per  cent.  This  cost  of  materials  does 
not  include  unused  materials  and  supplies  bought  for 
either  speculation  or  subsequent  use.  The  value 
added  by  manufacture  formed  41  per  cent,  of  the 
total  value  in  1909,  amounting  to  $8,^30,761,000, 
representing  the  difference  between  the  cost  of  the 
materials  used  and  the  value  of  the  manufactured 
products.  The  miscellaneous  expense  amounted  to 
$1,945,676,000  in  1909  and  to  $1,453,168,000  in 
1904.  This  includes  rent,  taxes,  and  expenses  not 
elsewhere  classified. 

The  average  number  of  wage  earners  employed 
during  1904  and  1909  was  5,468,383  and  6,615,046, 
respectively,  and  their  wages  totaled  $2,610,445,000 
and  $3,427,038,000  in  the  same  years.  The  number 
of  salaried  officials  and  clerks  was  ^19,^56  in  1904, 
and  790,267  in  1909,  and  their  salaries  amounted  to 
$574,439,000  and  $938,557,000,  respectively. 


36  Markets    and   Rural   Economics 

,  The  total  number  of  manufacturing  establishments 
in  the  United  States,  exclusive  of  the  hand  and  build- 
ing trades,  the  neighborhood  industries,  and  those 
whose  products  were  less  than  $500  per  annum  in 
value  (except  in  the  cases  of  factories  just  starting 
or  idle  during  part  of  the  year)  was  268,491  in  1909, 
an  increase  of  5 2,311  over  1904.  The  capital  in- 
vested rose  from  $12,675,581,000  in  1904  to  $18,- 
428,270,000  in  1909. 

We  see  from  these  figures  that  the  manufacturers 
had  in  1909  $18,428,270,000  invested  and  turned 
out  a  product  valued  at  $20,672,052,000.  And  the 
number  of  hands  employed  was  6,615,046 — at  a 
wage  cost  of  $3,427,038,000. 

The  farmer  had  $40,000,000,000  invested,  em- 
ployed 12,500,000  hands  and  produced  only  $9,000,- 
000,000  worth  at  farm  valuation,  in  1911,  which  was 
the  largest  crop  and  of  greatest  value  of  any  ever 
produced  to  that  date. 

RAILROADS. — We  had  in  1911  in  the  United 
States  238,000  miles  of  railroads  valued  at  $16,767,- 
544,827. 

These  railroads  employed  1,500,000  persons,  who 
received  annually  $1,100,000,000. 

They  used  58,000  locomotives,  46,000  passenger 
cars,  and  2,200,000  freight  cars. 

They  carried  900,000,000  passengers  a  year,  and 
1,600,000,000  tons  of  freight. 

Their  operating  revenue  was  $2,500,000,000. 

Their  operating  expense  was  $1,800,000,000. 

Their  taxes  were  $84,000,000. 

Poor's  Railroad  Manual,  for  the  year  1910,  shows 
that  there  were  237,867  miles  of  steam  railroad  in 
this  country,  that  the  gross  receipts  in  1909  were 
$2,513,212,763,  and  the  net  income  was  $1,018,- 


Markets  and  Rural  Economics  37 

OI4>§37-  They  received  for  carrying  924,423,075 
passengers  the  sum  of  $510,262,551,  or  56  cents  per 
passenger. 

BANKS. — The  finances  of  a  country  control  every 
other  business. 

The  total  number  of  national  banks  in  1912  was 
7,397,  with  capital  paid  in,  $1,025,441,384.50;  the 
circulating  outstanding  was  $717,258,996,  of  which 
$31,947,510  was  covered  by  lawful  money  of  a  like 
amount  deposited  with  the  treasurer  of  the  United 
States. 

There  were  in  December,  1912,  26,000  banks  of 
every  kind  in  the  United  States,  with  an  aggregate 
capital  of  $1,855,987,360,  with  deposits  of  $17,000,- 
000,000,  and  resources  aggregating  $25,000,000,- 
ooo. 

In  the  last  ten  years  the  number  of  banks  has 
increased  82  per  cent.,  87  per  cent,  in  deposits,  and 
6 1  per  cent,  in  capital. 

Banking  facilities  have  increased  commensurate 
with  the  increased  wealth.  In  1900  there  was  one 
bank  to  every  5,560  inhabitants;  now  there  is  one  to 
every  5,845. ^ 

The  clearing  houses  of  the  country  show  an  in- 
crease since  1900  of  90  per  cent,  having  risen  from 
$85,546,000,000  to  $158,556,000,000. 

According  to  the  report  of  the  Secretary  of  the 
Treasury,  November,  1913,  our  money  and  currency 
stood  as  follows : 

Gold  coin,  $614,478,201;  standard  silver  dollars, 
$74,012,1^2;  of  subsidiary  silver,  $160,466,188;  of 
gold  certificates,  ?48o,O79,73l  5  of  Treasury  notes, 
of  1890,  $2,583,874;  of  United  States  notes  or  green- 
backs, $341,401,413;  and  of  national  bank  notes, 
$722,615,240;  footing  up  a  total  of  $3,417,109,678. 


3$  Markets  and  Rural  Economics 

A  Comparison  for  One  Year — 1907 

The  wealth  of  the  United  States  was  increased  in 
the  year  1907,  $4,400,000,000. 
Who  got  the  increase? 

The  manufacturers  received $2,672,000,000 

The  railroad  companies  received.  .  .  327,000,000 

The  national  bankers  received 127,000,000 

The  savings  bankers   received 238,000,000 

State  banks  received 490,000,000 

The  life  insurance  companies  received  333,000,000 

Accident  insurance  companies  received  40,000,000 

Marine  insurance  companies  received  40,000,000 
The  express  companies,  news  compa- 
nies, Pullman.  Palace  Car  Company, 

and  other  trusts  received 156,000,000 


Total ,  $4,400,000,000 

The  farmers  received  no  profits,  although  they 
sold  a  crop  in  1907  for  $7,420,000,000. 

The  brawn  and  brain  of  92  million  people  in  1911 
added  $4,800,000,000  to  our  national  wealth.  Ac- 
cording to  the  sworn  statements  of  the  270,000  cor- 
porations, their  net  profits  were,  for  the  year  1911, 
$3,300,000,000.  The  cost  of  running  the  national, 
state,  county,  municipal,  etc.,  $6,800,000,000.  When 
at  $3,500,000,000.  Total  tribute  to  corporations 
and  running  expenses  of  the  government,  national, 
state,  county,  municipal,  etc.,  6,800,000,000.  When 
the  toll  we  pay  to  the  various  governments  and  cor- 
porations is  $5,800,000,000,  and  the  annual  increase 
in  national  wealth  is  only  $4,800,000,000,  it  is  plain 
that  we  are  drawing  on  our  capital  stock  $2,000,000,- 
ooo  every  year. 

The  public  indebtedness  of  the  United  States,  na- 
tional, state,  county,  municipal,  and  district,  is  equal 


Markets   and   Rural   Economics  39 

to  the  entire  volume  of  money  in  the  nation  and 
costs  in  interest  some  $120,000,000  annually.  This 
added  to  the  private  debts,  which  cost  a  higher  rate 
of  interest,  and  the  debt  load  of  the  people  is  ap- 
palling. 

The  entire  area  of  the  United  States  is  approxi- 
mately 2,000,000,000  acres.  There  are  6,400,000 
farms,  or  878,800,000  acres  are  in  farms;  478,500,- 
ooo  acres  are  improved.  The  farm  area  represents 
about  46  per  cent,  of  the  total  land  area,  and  the 
improved  land  represents  more  than  half  the  total 
area  in  farms.  Improved  land  represents  about  6ne- 
fourth  the  total  land  area  of  the  country.  On  these 
acres  are  produced  22,000,000  carloads  of  products 
a  year,  equivalent  to  a  train  of  cars  reaching  six  times 
around  the  earth. 

The  value  of  the  1910  crop,  at  the  average  price 
received  by  the  farmers,  amounted  to  nearly  $9,000,- 
000,000.  Presuming  that  the  farmers  consume  $3,- 
000,000,000  of  it  (about  one-third  of  our  population 
live  on  the  farm),  the  amount  sold  by  the  farmer  is 
$6,000,000,000.  For  this  the  consumer  paid  $13,- 
000,000,000,  making  a  difference  of  $7,000,000,000 
for  the  cost  of  getting  it  from  the  farmer  to  the 
consumer. 

There  is  a  necessary  expense  in  distribution  that 
cannot  be  avoided,  but  there  is  entirely  too  much 
waste  between  the  producer  and  consumer.  At  least 
$2,000,000,000  could  be  saved  through  cooperative 
efforts  on  the  part  of  the  farmers  and  consumers. 

To  divide  this  $2,000,000,000  equally  between 
the  farmer  and  consumer  would  be  $1,000,000,000 
to  the  farmers,  which  would  be  $44.44  for  each  man, 
woman  and  child  living  on  the  farms  of  this  country. 


40  Markets    and   Rural   Economics 

And  to  divide  the  $1,000,000,000  among  the  con- 
sumers would  be  $16.66  per  capita  for  the  consumers 
of  the  United  States. 

The    value    of    our    exports    for 

1911  was    $2,049,320,199 

The    value    of    our    imports    for 

I911 1,527,226,105 

The    value    of    both    exports    and 

imports  for  1911    3^76,546,304 

The  amount  of  exchanges  of  the 
clearing  houses  of  the  United 
States  for  1910  .  . $168,986,664,000 

With  a  population  of  33,000,000,  the  South  now 
has  invested  in  business  about  $84,000,000  more 
than  the  whole  United  States  could  show  in  1880. 
The  value  of  the  South's  crops  now  exceeds  the  value 
of  the  crops  of  the  whole  country  as  late  as  1890. 
The  South's  coal  products  in  1911  amounted  to  two 
and  a  half  times  the  coal  output  of  the  whole  country 
in  1890. 

Notwithstanding  these  signs  of  fabulous  wealth 
and  evidences  of  prosperity,  the  pessimistic  fact  re- 
mains that  as  land  values  and  product  values  increase 
the  number  'of  farms  relatively  decreases  and  the  pro- 
portion of  tenants  grows  greater!  There  is  a  grave 
economic  problem  involved  in  this  anomalous  and 
paradoxical  situation. 

In  the  states  of  Kentucky,  Tennessee,  Mississippi, 
Louisiana,  Texas,  Arkansas,  and  Oklahoma  tenant 
farms  have  increased  from  3  ?  to  5 1  per  cent,  during 
the  last  thirty  years!  In  Mississippi  and  Georgia 
two-thirds  of  -the  farms  are  tilled  by  those  who  have 
no  share  in  their  ownership.  In  South  Carolina  63 
per  cent,  of  the  farms  are  operated  by  tenants. 

The  states  with  the  largest  average  annual  income 


Markets   and   Rural   Economics  41 

per  farm  worker  are  decreasing  in  farm  population. 
The  average  farm  wages  in  the  upper  Mississippi 
valley,  where  wages  are  highest,  is  less  than  thirty 
dollars  a  month.  At  the  present  price  of  farms  in 
the  most  productive  states  of  Illinois,  Indiana  and 
Iowa,  if  the  wage  worker  saved  every  dollar  it  would 
take  him  from  thirty-five  to  forty-five  years  to  earn 
enough  to  own  an  average  farm !  Half  the  number 
of  those  holding  the  plow-handles  of  the  United 
States  are  homeless ! 

Taking  the  country  as  a  whole,  more  than  one- 
half  of  the  families  have  an  income  of  less  than 
$600  a  year,  and  more  than  4,000,000  families  have 
an  income  of  less  than  $400  a  year. 

If  these  facts  do  not  concern  us  nothing  human 
is  worth  while. 

LESSON  III 

What  percentage  of  the  inhabitants  that  have  been 
in  the  world  are  i>ow  living? 

What  percentage  of  the  people  now  living  are  in 
the  United  States? 

How  many  over  ten  years  of  age  are  doing  some- 
thing; useful? 

Give  the  population  as  per  vocations. 

Has  the  farmer  held  his  own  as  a  property  owner 
with  those  of  other  callings? 

To  what  do  you  attribute  the  enormous  increase 
in  farm  values  during  the  first  decade  of  the  century? 

Did  this  increase  indicate  greater  net  profits  on 
amount  invested? 

How  do  farm  product  values  compare  with  manu- 
factured product  values  on  a  basis  of  wealth  invested 
and  hands  employed? 


42  Markets    and   Rural   Economics 

How  do  farm  profits  compare  with  railroad  cor- 
poration profits  on  the  same  basis? 

How  does  farming  compare  with  banking  under 
the  same  test? 

What  becomes  of  the  annual  net  increase  in  wealth? 

What  is  our  volume  of  money? 

What  is  the  amount  of  public  indebtedness  of  the 
country  ? 

What  are  the  annual  expenses  of  the  governments, 
national,  state,  county  and  municipal? 

What  percentage  of  our  national  area  is  cultivated? 

How  much  waste  is  estimated  to  take  place  be- 
tween the  farmer  and  the  consumer? 

Does  the  annual  output  of  the  farms  of  the 
United  States  indicate  laziness  or  thriftlessness  of  the 
farmers  ? 

What  effect  has  the  increase  of  farm  and  farm 
product  values  had  on  tenant  farming? 

Give  some  statistics  on  tenantry. 

Give  your  version  of  the  cause  of  this  tendency  as 
indicated  by  the  statistics. 

What  can  you  say  of  the  opportunity  of  farm 
laborers  to  become  farm  owners? 

What  can  you  say  of  the  average  incomes  of  half 
the  families  of  the  country? 

Why  is  it  worth  your  while  to  be  concerned  about 
these  things? 


CHAPTER  IV 

AGENCIES  CONTROLLING  PRICE 

THE  LAW  OF  PRICE. — One  of  just  three  things, 
or  a  combination  of  them,  controls  the  price  of  abso- 
lutely everything  bought  and  sold : 

1.  Supply  and  demand. 

2.  Trust. 

3.  Speculation. 

When  not  interfered  with  by  artificial  means,  supply 
and  demand  will  regulate  prices  (not  forgetting  that 
the  supply  and  demand  of  money  act  conjointly  with 
the  supply  and  demand  of  that  which  money  buys). 
But  very  few  articles  of  modern  commerce  are  not 
interfered  with  by  artificial  means. 

Articles  perishable  in  quality  and  limited  in  use — 
truck  gardening  products,  strawberries,  tomatoes, 
etc. — are  subject  to  the  fluctuations  of  spasmodic  de- 
mands. But  articles  non-perishable  in  quality  and 
general  in  use,  such  as  cotton,  grain,  meats,  machin- 
ery, coal,  etc.,  are  not  subject  to  violent  fluctuations 
in  the  market  if  controlled  by  the  law  of  supply  and 
demand  or  regulated  by  a  trust.  Only  speculation 
operates  to  change  suddenly  the  price  for  which  there 
is  a  constant  demand  and  a  general  supply. 

So  that  when  commodities  of  this  kind  vary  in 
price,  so  as  to  bring  about  spasmodic  changes  one 
may  know  that  speculation  is  setting  the  price.  The 


44  Markets    and   Rural   Economics 

law  of  supply  and  demand  does  not  operate  that  way. 
Nor  does  a  trust  allow  its  output  to  vary  in  value 
by  the  "ticker V1  points  manipulated  by  "riggers" 
on  change.  One  never  hears  of  anyone  buying  fu- 
tures on  coal,  oil,  beef,  steel,  or  any  of  the  great 
commodities  handled  by  trusts.  The  supply  is  reg- 
ulated by  demand  at  a  fixed  scale  of  price,  arbitrarily 
set,  and  the  article  furnished  to  consumers  only  as 
demand  meets  the  price.  It  does  not  matter  how 
many  new  oil  wells  are  developed,  it  does  not 
tumble  the  price  of  oil  below  the  cost  of  production — 
the  trust  sees  after  the  supply  and  price.  Go  through 
the  list  of  trust-handled  articles  of  commerce,  and  the 
underlying  business  principle  is  the  same — regulate 
the  supply  to  demand  in  accordance  with  the  law  of 
markets. 

The  same  law  applies  to  a  railroad  system,  the 
supply  of  the  money  volume,  sugar,  coffee,  beef,  iron, 
coal,  oil,  electricity,  a  patent,  any  commodity  or  ser- 
vice that  the  public  demand  and  the  available  supply 
of  which  is  limited. 

The  demand  for  the  great  staple  products  of  the 
farm  is  constant  the  year  round,  and  it  is  a  violation 
of  every  law  of  business  success  and  principle  of 
economy  to  rush  these  supplies  on  the  market  regard- 
less of  the  needs  of  the  consumers.  There  is  a  sci- 
ence of  commerce,  the  same  as  of  chemistry,  and  it 
behooves  the  farmer,  as  a  feeder  of  the  streams  of 
commerce,  to  understand  the  part  he  plays  in  the 
economy  of  business. 

Trust  managers  understand  the  science  of  com- 
merce and  apply  their  knowledge.  Knowledge  is 
power,  and  commercial  knowledge,  applied  by  the 
few,  and  commercial  stupidity  of  the  masses,  have 
left  the  masses  the  victims  of  the  classes. 


Markets   and   Rural   Economics  45 

To  illustrate  by  concrete  examples:  We  have  a 
great  crop  in  the  South  which  the  farmers  peddle 
out  or  auction  off  to  the  local  bidders  as  soon  as  the 
crop  is  gathered.  The  more  they  make  of  it  the 
less  they  get  for  it. 

Is  that  the  best  way  to  sell  a  crop  that  is  non- 
perishable  and  of  universal  use?  Do  manufacturers 
sell  that  way?  Do  mine  owners  sell  their  products 
that  way?  Do  railroads  sell  their  service  by  peddling 
their  tickets  or  selling  them  at  auction?  Do  banks 
loan  money  through  street-hucksters?  Are  public 
offices  let  out  to  the  lowest  bidder?  The  very  thought 
is  so  preposterous  that  to  answer  these  questions 
would  be  childish.  Then  why  does  the  farmer  do 
this  in  direct  violation  of  every  principle  of  success- 
ful business?  Should  he  continue  thus  to  use  his 
vvealth  to  show  how  little  he  knows  about  rural 
economics?  Is  it  not  within  the  purview  of  rural 
economics  to  deal  with  this  question,  and  help  to 
solve  one  of  the  big  business  problems  confronting 
us  and  demanding  solution? 

There  is  certainly  no  excuse  whatever  for  the  till- 
ers of  the  soil  not  getting  full  measure  of  remunera- 
tion for  their  labor.  When  the  change  contemplated 
has  been  ushered  in,  there  will  be  no  more  thought 
of  returning  to  the  old  ways  than  we  think  now  of 
going  back  to  the  reaping  hook,  the  stage  coach  and 
the  wooden  plow.  The  opportunity  presented  is  a 
test  of  the  business  intelligence  of  the  man  behind 
the  plow. 

Do  you  not  know  that  it  does  not  necessarily  mean 
anything  for  a  people  to  live  in  a  rich  country?  Other 
things  being:  equal,  a  people  are  prosperous  in  pro- 
portion to  their  industry  and  the  fertility  of  the  soil. 
But  other  things  are  hardly  ever  equal. 


46  Markets    and   Rural   Economics 

Let  us  consider  an  instance  or  two. 

The  Israelites  were  given  the  pick  of  Egypt,  which 
was  itself  the  garden  spot  of  the  world.  But  when 
Joseph  died  and  other  Pharaohs  came  to  the  throne 
that  knew  not  Joseph,  they  enslaved  the  Israelites, 
reducing  them  to  abject  servitude.  All  but  a  bare 
existence  was  taken  as  tribute  by  the  Egyptian  mon- 
archy. They  were  placed  under  task-masters  and 
compelled  to  "make  bricks  without  straw."  Nothing 
was  in  life  for  them  but  servitude.  Fertility  of  the 
soil  and  industry  did  not  mean  prosperity  to  them. 
Finally,  before  they  could  prosper,  they  had  to  exile 
themselves  to  a  country,  which,  in  comparison  with 
the  one  they  had  left,  was  an  exploded  desert.  And 
there  they  did  prosper,  till  they  excited  the  cupidity 
of  the  Babylonians,  who  came  and  transferred  them 
to  the  valley  of  the  Euphrates,  to  serve  the  Baby- 
lonians. 

India  is  one  of  the  richest  countries  in  natural  re- 
sources in  all  the  East;  and  yet  more  people  starve 
to  death  there,  every  year,  than  in  any  other  country 
on  the  globe. 

Ireland  is  one  of  the  most  fertile  countries  in  all 
Europe,  and  yet,  because  of  the  failure  of  the  Irish 
potato  crop  in  the  year  1846,  1,000,000  Irish  people 
actually  starved  to  death,  and  another  million  fled. 
With  all  their  industry  and  natural  resources  they 
lived  so  close  to  the  brink  of  starvation  that  the  fail- 
ure of  a  crop  left  the  people  helpless,  and  no  matter 
what  the  rest  of  the  world  produced  they  could  not 
purchase. 

Take  South  America,  practically  an  undeveloped 
continent  of  wealth,  but  a  country  that  plays  but 
little  part  in  the  international  affairs  of  governments. 

What  do  all  these  instances  show? 


Markets   and   Rural    Economics  47 

In  the  case  of  the  Israelites  it  was  a  case  of  oppres- 
sion— they  did  not  get  justice.  Government  robbery 
would  express  it. 

In  the  case  of  India,  it  was  a  case  of  government 
extortion  linked  with  the  ignorance  and  the  supersti- 
tion of  its  tropical  people. 

With  Ireland  it  was  a  case  of  discrimination  and 
landlord  extortion. 

In  South  America  it  is  the  people. 

How  is  it  with  us  here  in  the  United  States? 

Take  New  England,  the  poorest  part  of  our  do- 
main that  pretends  to  be  cultivated  at  all.  They  have 
poverty  there.  But  in  point  of  wealth  per  capital, 
they  are  ahead  of  the  most  fertile  section  of  the 
whole  country — the  rich  alluvial  bottoms  of  the  Mis- 
sissippi valley,  where  they  make  a  bale  of  cotton  to 
the  acre  and  other  things  in  proportion. 

Wherefor  is  this  difference? 

It  is  not  because  they  havt  natural  advantages  in 
the  sterile  hills  of  the  East. 

It  is  nothing  more  nor  less  than  a  difference  of 
management. 

Production,  transportation,  wholesale  jobbing  and 
retail  expenses,  agencies  of  advertising  and  taxation 
expenses  all  enter  the  bill  to  the  consumer.  Legisla- 
tion affects  price  by  regulating  the  money  supply,  by 
taxation  and  tariff  and  immigration  regulations. 
Standards  of  civilization  have  much  to  do  with  the 
wants  of  the  people,  and  these  wants  determine  the 
quality  and  amount  of  products  consumed.  The  phys- 
ical needs  and  wants  of  people  of  the  tropics  are 
different  from  the  physical  needs  and  wants  of  the 
people  of  the  temperate  zones.  Even  a  greater  dif- 
ference exists  when  it  comes  to  intellectual  wants. 


48  Markets    and   Rural   Economics 

These  are  determined  almost  wholly  by  the  degree 
of  culture  and  refinement  that  is  possessed. 

Any  article  produced  exclusively  for  sale  and  not 
for  use  by  the  producer  is  wholly  dependent  for  a 
market  on  standards  of  civilization,  and  the  power 
to  consume.  Human  desire  is  always  beyond  the 
power  to  supply  when  it  comes  to  articles  of  comfort, 
pleasure  and  property  of  permanent  value.  This  in- 
sures constant  employment  so  long  as  the  power  to 
purchase  labor  or  its  products  is  possessed  by  the 
masses.  •  Every  dollar's  worth  of  wealth  or  time 
wasted  means  so  much  denied  the  people  which  they 
might  have. 

LESSON  IV 

What  are  the  agencies  of  distribution? 

What  are  the  agencies  controlling  price? 

What  proportion  of  the  cost  of  distribution  is  con- 
sumed by  transportation? 

What  proportion  is  consumed  by  merchandising? 

What  proportion  is  consumed  by  unavoidable 
waste  ? 

How  many  kinds  of  merchandising?     Name  them. 

Is  the  cost  of  production  easily  obtained? 

Is  the  cost  of  distribution  easily  obtained? 

Which  are  the  easier  to  obtain,  and  why? 

In  determining  price  what  steps  would  you  follow 
to  reach  a  correct  conclusion  ? 

Does  living  in  a  rich  country  and  raising  big  crops 
insure  prosperity? 

Can  you  name  exceptions  to  the  rule? 

What  do  you  consider  the  cause  for  these  excep- 
tions? 


Markets   and  Rural  Economics  49 

What  do  you  consider  the  greatest  controlling  fac- 
tor in  controlling  price? 

What  is  your  opinion  as  to  the  influence  of  legis- 
lation on  price? 

What  determines  the  power  to  consume? 

What  is  your  opinion  of  the  influence  of  the  vol- 
ume of  money? 

Of  tariffs? 

Of  taxation? 

Of  physical  needs  and  wants? 

Of  intellectual  needs  and  wants? 

How  are  standards  of  civilization  determined? 

What  effect  does  the  standard  of  civilization  have 
on  price? 


CHAPTER  V 

MARKETING  BY  MANUFACTURERS 

Manufacturers  sell  by  wholesale  or  through  agen- 
cies which  they  operate  at  retail  distributing  points. 
The  cost  of  manufacturing,  the  cost  of  marketing, 
the  demand,  and  the  competition  to  be  met  are  care- 
fully estimated  by  the  manufacturer.  It  is  not  the 
amount  of  an  article  produced  as  compared  to  the 
annual  demand  that  sets  the  price  but  the  manner 
in  which  the  market  is  fed  by  the  supply  that  sets  the 
market  price.  Two  articles  that  can  be  readily  sub- 
stituted each  for  the  other  must  mutually  respond  to 
quotations.  The  price  of  an  article,  let  it  be  a  luxury 
or  a  necessity,  is  a  ruling  factor  in  determining  the 
amount  consumed.  The  power  of  the  human  race 
to  consume  has  never  been  measured.  The  character 
of  the  products  consumed  is  to  a  large  extent  a  ques- 
tion of  custom.  Often  customs  are  changed  by  sales- 
men introducing  new  devices,  patterns,  methods  or 
styles.  Here  the  psychology  of  salesmanship  plays 
a  part  in  the  economy  of  business.  The  personal 
equation  is  the  strongest  force  in  human  affairs.  The 
business  world  is  subject  to  the  power  of  personal 
contact.  This  is  the  secret  of  the  policy  of  sending 
representatives  direct  to  customers.  A  representa- 


Markets    and  Rural   Economics  51 

tive  of  a  manufacturer  or  wholesaler  to  a  retail  dealer 
is  called  a  drummer;  if  sent  direct  to  the  retail  pur- 
chasers he  is  called  an  agent.  The  latter  is  the  more 
expensive  method,  as  so  many  more  people  have  to 
be  canvassed  to  handle  a  given  volume  of  business, 
but  often  it  puts  things  immediately  on  the  market 
that  would  not  be  called  for  if  kept  for  sale  by  retail 
dealers.  The  average  cost  of  marketing  from  fac- 
tories by  consumers  varies,  but  is  constantly  being 
lowered. 

Just  what  part  of  tfiis  expense  is  unavoidable  and 
what  percentage  could  be  saved  and  divided  between 
the  producer  and  consumer  cannot  be  .definitely 
stated,  but  we  know  that  in  the  aggregate  it  would 
be  a  fabulous  sum. 

Many  large  concerns  divide  up  the  territory  in 
which  they  operate  and  so  systematize  their  sales  de- 
partment that  each  order  secured,  no  matter  by  what 
method,  must  come  through  certain  offices  and  be 
credited  to  the  sales-managers  of  certain  districts.  A 
uniform  price  is  set — regardless  of  the  amount  of 
the  article  on  hand  or  the  rate  of  sales  per  week, 
month  or  year — all  agents  must  conform  strictly  to 
the  price  thus  arbitrarily  set  on  penalty  of  losing  their 
positions  for  any  variation.  This  abolishes  competi- 
tion among  agents  and  also  prevents  retaliatory  price- 
cutting  by  competitive  firms.  The  only  instances 
where  this  rule  is  violated  is  where  a  firm  or  corpora- 
tion feels  that  it  is  strong  enough  to  completely  de- 
stroy competition  by  underselling  competitors  until 
they  have  to  surrender  the  territory  to  the  stronger 
company.  These  tactics  have  been  roundly  de- 
nounced by  publicists  and  the  public  generally  con- 
demns them  as  unfair  and  unjustifiable,  but  laws  have 
not  been  enacted  to  prevent  it  and  some  of  the  great- 


52  Markets    and   Rural   Economics 

est  trusts  of  the  country  fought  their  way  to  mastery 
by  this  method. 

The  methods  of  the  department  stores  are  little 
different  from  those  of  the  ordinary  retail  store  ex- 
cept the  strict  organization  into  departments  and  the 
details  incident  to  a  larger  business.  The  mail-order 
houses  use  printer's  ink  instead  of  drummers  and  sell 
either  by  wholesale  or  by  retail  exclusively.  The 
psychology  of  salesmanship  extends  to  the  advertis- 
ing method  of  finding  customers.  Correspondence 
has  its  art  and  is  a  part  of  the  catalogue  system  of 
soliciting  patrons.  The  foreign  markets  are  even 
more  sensitive  to  judicious  soliciting  of  trade  than 
home  markets.  Reciprocal  trade  agreements  count 
but  little  for  trade  until  exporters  learn  to  cater  to 
the  idiosyncracies  of  the  foreign  customer.  When 
once  secured  he  is  hard  to  turn  to  other  quarters  for 
supplies. 

A  line  of  merchants  are  adopting  the  plan  of  em- 
ploying a  few  expert  buyers  who  know  the  market, 
the  demand,  and  the  quality  of  things.  These  buyers 
command  the  very  best  prices  from  the  factories  be- 
cause of  the  enormous  bills  they  can  furnish.  This 
enables  this  line  of  merchants  to  either  sell  cheaper 
or  make  more  than  the  little  "one-horse"  buyer.  And 
all  this  means  a  process  of  elimination  in  the  business 
world. 

The  marvelous  development  and  expansion  of 
modern  commerce  has  done  more  to  introduce  and 
disseminate  European  civilization  to  the  utmost  parts 
of  the  earth  than  all  other  agencies  combined.  It 
has  so  interlinked  the  interests  of  nations  and  inter- 
woven the  interests  of  the  citizens  of  every  countrv 
with  those  of  every  other  countrv  that  the  danger  of 
strife  between  nations  becomes  less  and  less  as  the 


Markets   and  Rural   Economics  53 

years  go  by,  and  the  dream  of  universal  peace  is 
nearer  realization  than  ever  before  since  the  twilight 
dawn  of  history. 


LESSON  V 

What  are  the  methods  of  marketing  by  the  man- 
ufacturers? 

What  kind  of  knowledge  does  he  seek  to  obtain? 
Why? 

What  does  the  manner  of  furnishing  supply  to 
demand  have  to  do  with  price? 

What  about  substitution  in  its  effect  on  price? 

What  effect  does  the  price  have  on  consumption? 

What  have  you  to  say  of  foreign  trade  methods? 
between  the  amount  the  people  can  consume  and  the 
amount  they  can  exist  upon? 

What  have  you  to  say  of  the  difference  between 
the  manufacturers'  price  and  the  consumer's  price? 

Is  there  room  for  improvement? 

What  are  your  suggestions? 

State  advantages  and  disadvantages  of  selling  di- 
rect to  consumers  and  to  jobbers  and  wholesalers. 

What  are  the  methods  of  marketing  by  jobbers? 

What  are  the  methods  of  marketing  by  whole* 
salers? 

What  are  the  methods  of  selling  by  retailers? 

Describe   department-store  methods. 

Describe  mail-order  methods. 

Why  have  codes  for  cost  marks? 

Give  the  advantages  and  disadvantages  of  selling 
through  drummers;  selling  by  catalogue;  by  corre- 
spondence. 

What  have  you  to  say  of  foreign  trade  methods. 


54  Markets    and   Rural   Economics 

What  can  you  say  of  the  influence  of  modern 
commerce  on  the  civilization  of  the  world? 

How  has  it  carried  progress  to  dark  continents  and 
mutualized  the  business  relations  of  the  people  of  all 
countries  ? 


CHAPTER  VI 

MARKETING  BY  CORPORATIONS 

Corporations,  like  individuals,  sell  products  or 
service. 

Manufacturers  sell  products. 

Insurance  companies  sell  "protection." 

Banks  hire  out  money. 

Railroads  sell  service. 

Corporation  agencies  sell  service. 

Shipping  companies  sell  service. 

It  matters  not  whether  it  is  products  or  service 
that  is  for  sale,  there  is  judicious  feeding  of  the 
market  at  schedule  rates.  Corporations  once  com- 
peted with  each  other  for  trade,  but  that  is  a  thing 
of  the  past  except  in  sporadic  instances.  Competi- 
tion is  so  far  from  being  the  life  of  trade  that  it 
is  the  death  of  the  weaker  m  the  contest. 

A  trust  may  be  a  monopoly  or  it  may  not  be.  A 
monopoly  is  such  control  of  an  output  or  service 
that  it  can  crush  competition;  if  a  trust  on  produc- 
tion  it  can  limit  the  output,  if  a  trust  on  service  it 
can  limit  the  service  till  the  prices  are  inflated. 

A  public  monopoly  is  one  owned  and  operated  by 
the  government.  A  private  monopoly  is  one  owned 
and  controlled  by  private  citizens — as  individuals  or 
as  members  of  a  corporation.  A  franchise  monopoly 
is  one  granted  by  law — ostensibly  for  the  consider- 
ation of  certain  service. 


56  Markets    and   Rural   Economics 

There  is  nothing  confronting  the  statesmanship  of 
the  age  that  is  more  perplexing  than  to  legislate 
properly  on  trusts  and  monopolies.  Much  legislat- 
ing, both  state  and  national,  has  been  done,  and  lit- 
tle definitely  settled  or  accomplished. 

It  is  hardly  possible  for  farmers  to  form  a  trust, 
for  the  reason  that  they  cannot  limit  supply.  There 
is  no  regulation  of  production  from  a  central  head 
as  in  manufacturing.  Each  family  is  an  independent 
unit,  free  to  produce  whatsoever  it  elects.  If  a  price 
is  demanded  above  the  consuming  standard  consump- 
tion is  cut  short  and  the  new  supply  coming  on  will 
pile  up  on  the  reserve  and  doubly  depress  the  price. 

Is  the  immense  wealth  secured  by  trust  magnates 
wasted  because  they  have  it? 

No. 

/^  It  is  still  in  existence  and  kept  busy  making  more. 
The  families  of  rich  men  frequently  squander  to  the 
limit,  and  show  that  they  do  not  know  what  to  do 
with  what  they  have.  But  the  great  bulk  of  the 
wealth  thus  absorbed  by  trusts  is  very  actively  em- 
ployed by  owners.  However,  this  is  no  excuse  for 
monopolies.  But  really  it  might  be  well  to  look  at 
some  of  our  real  squandering,  the  squandering  that 
destroys,  the  squandering  that  is  done  by  all  classes. 
The  only  reason  the  poor  do  not  squander  is  because 
they  have  nothing  to  squander.  They  are  no  better 
and  no  worse  than  the  rich  who  have  it  to  throw 
away.  Squandering  is  an  economic  crime  and  no 
class  is  any  more  excusable  for  it  than  another.  Envy 
plays  a  good  part  in  our  denunciations  of  the  rich. 
Unless  we  are  willing  to  get  down  to  business  and 
correct  the  absurd  system  under  which  we  are  work- 
ing, squandering  on  the  one  side  and  suffering  on 
the  other  will  continue. 


Markets   and  Rural   Economics  57 

We  have  touched  the  half  billion  mark  in  our 
yearly  expenditures  for  schools  in  this  country.  A 
wonderful  lot  of  money;  more  than  any  other  govern- 
ment ever  spent  for  the  same  purpose  during  a  twelve 
months  in  the  history  of  the  world!  It  is  actually 
five-eighths  as  much  as  we  spend  yearly  for  tobacco ! 
It  is  nearly  a  third  of  what  we  spend  annually  for 
beverages ! 

HOW  WE  SQUANDER 

Yes,  we  are  a  great  nation,  and  we  are  great 
squanderers. 

Our  annual  whiskey,  wine  and  beer  bill  is  $i,- 
700,000,000. 

Our  annual  tobacco  bill  is  $800,000,000. 

Our  annual  coffee  bill  is  $66,000,000. 

Our  annual  tea  bill  is  $16,000,000. 

We  spend  to  prosecute  crime  $600,000,000. 

To  support  300,000  prostitutes  over  $200,000,000 
is  contributed  annually,  and  some  40,000  new  re- 
cruits are  plunged  into  this  maelstrom  to  the  ruin  of 
the  race. 

The  government  appropriations  approximate  an 
average  of  $1,000,000,000  each  Congress;  one-half 
of  which  goes  for  war  and  the  concomitants  of  war. 
We  are  still  organized  on  the  principle  of  Cain, 
whose  yoke  was  neither  easy  nor  his  burden  light. 
In  Europe  the  war  debt  is  $26,000,000,000,  which 
causes  taxes  of  $9,500,000  a  year. 

Americans  spend  $200,000,000  a  year  in  Europe, 
and  American  heiresses  sell  themselves  in  marriage 
to  the  titled  nobilitv  of  Europe,  showing  the  vanity 
of  even  those  raised  under  American  influences,  and 
their  cravings  for  the  empty  baubles  of  royalty. 

We  spend  for  bread-stuffs  $780,000,000;  for  pub- 
lic education,  $500,000,000, 


58  Markets    and   Rural   Economics 

Each  year  the  American  people  produce  billions  of 
dollars  of  wealth  more  than  are  consumed  in  the 
process  of  production.  This  surplus  is  absorbed  by 
the  freebooters  of  commerce.  Fifty  years  ago  there 
were  but  few  stocks  and  bonds  in  the  country.  Now 
there  are  $70,000,000,000  of  stocks,  bonds  and  se- 
curities marked  on  the  boards  of  the  exchanges,  and 
otherwise  operated,  yearly.  Financial  buccaneers  use 
them  as  a  means  of  scooping  in  the  wealth  of  the 
millions.  The  rise  and  fall  of  the  stocks  and  bonds 
are  manipulated  so  as  to  lure  the  public  to  invest, 
and  then  they  are  frightened  to  sell  at  slaughter 
prices,  and  the  stocks  and  bonds  are  repurchased. 
These  artificial  booms  and  panics  are  engineered  to 
leave  millions  of  profits  to  those  behind  the  throne 
as  the  market  swings  to  and  fro. 

This  process  is  allowed  to  be  repeated  at  irregular 
intervals  and  the  investing  public  continues  to  bite  at 
the  same  old  bait  with  the  same  old  hook  in  it.  Be- 
cause you  do  not  invest  does  not  free  you  from  the 
penalty.  You  deal  with  those  who  lose,  and  they  get 
it  from  you.  The  stock  market  has  become  the  vam- 
pire of  commerce.  The  stocks  of  copper,  railroads, 
steel,  oil,  tobacco,  etc.,  are  sent  up  and  down  at  will, 
and  legions  of  unsuspecting  investors  are  robbed  by 
the  corsairs  of  the  mart. 

By  the  triple  alliance  of  money,  politics,  and  the 
press,  the  corporate-owned  industries,  the  money  of 
the  nation,  and  the  very  earth  itself  are  all  under  the 
control  of  practically  the  same  power,  masked  in  vari- 
ous guises. 

CORPORATIONS  AND  TRUSTS 

The  business  corporation  was  a  device  of  the 
Romans.  The  original  idea  came  from  Caesar,  and 
was  suggested  by  the  uncertainty  of  human  life.  It 


Markets   and  Rural   Economics  59 

was  an  insurance  against  the  dissolution  of  a  project 
in  case  of  death.  The  intent  was  to  provide  for 
the  continuance  and  perpetuity  of  enterprises  which 
probably  no  man  could  carry  out  during  his  lifetime. 
The  application  of  the  corporation  was  for  building 
water  systems  and  laying  out  roadways.  The  cor- 
poration provided  against  stoppage  of  the  work  in 
case  of  the  death  of  any  man  connected  with  it — a 
body  without  death,  a  mind  without  decline. 

According  to  a  writer  in  a  recent  number  of  the 
Banking  Law  Journel,  100  years  ago  there  was  no 
institution  in  the  country  formed  on  the  basis  and 
conducted  for  the  purpose  of  the  modern  trust  com- 
pany. In  1836  there  were  two  in  New  York  and  two 
in  Philadelphia.  Twenty-five  years  ago  there  were 
thirty,  and  at  the  present  time  there  are  over  1,500, 
with  assets  of  over  $4,000,000,000.  Since  1890  the 
growth  has  been  rapid  and  all  States  except  Florida, 
Nebraska,  and  Wyoming  now  have  trust  company 
laws. 

The  relation  of  the  trust  company  to  the  people 
and  its  primary  and  elemental  functions  is  that  of 
trustee,  and  it  is  in  this  capacity  that  the  trust  com- 
pany renders  its  largest  and  best  services  to  the  com- 
munity. 

As  a  fiduciary  institution  the  trust  company  has  sev- 
eral advantages  over  the  individual,  among  which  are 
continuity  of  management,  there  being  no  guarantee 
that  the  individual  will  live  to  fulfil  the  task  assigned 
him,  nor  that  he  will  even  make  a  good  beginning. 
The  corporation  is  endowed  with  perpetual  life,  and 
can  assure  a  continuous  administration.  The  trust 
company  can  serve  a  man  after  death  as  effectively  as 
in  life.  It  can  advise  him  while  living,  act  for  him, 
if  need  be,  and  administer  his  estate  when  dead. 


60  Markets    and   Rural   Economics 

Another  advantage  is  that  investments  are  made  by 
experts.  This  is  a  distinct  advantage  over  private 
methods. 

In  the  development  of  modern  business  and  indus- 
try we  found  need  of  a  man  that  did  not  exist.  Great 
enterprises  were  in  need  of  enormous  capital,  more 
than  any  one  person  had.  They  needed  thousands 
of  workers  who  must  be  paid  before  the  enterprise 
reached  the  point  of  earning  returns  for  the  outlay. 
In  this  extremity  the  state,  in  its  sovereign  capacity, 
created  and  named  him  Corporation.  The  industrial 
god  of  America  is  Business  and  his  prophet  is  Cor- 
poration. The  way  it  has  resulted,  the  chartering 
of  corporations  amounts  to  granting  letters  of  marque 
and  reprisal  to  exploit  commerce.  Granting  letters 
of  marque  and  reprisal  in  time  of  war  is  legalized 
piracy  operating  as  a  military  necessity.  Corporations 
are  creatures  of  necessity,  but  they  are  prone  to  run 
to  greed.  There  are  1,000,000  corporations  in  the 
United  States  doing  business.  They  employ  82  per 
cent,  of  the  capital;  pay  72  per  cent,  of  the  wages; 
employ  71  per  cent,  of  the  wage  earners,  and  buy 
7^  per  cent,  of  all  the  materials  used  in  the  manu- 
facturing enterprises  of  the  country. 

The  corporation  has  bred  the  trust. 

The  trust  is  the  final  development  of  organized 
greed. 

This  nation  is  passing  through  that  world-old  proc- 
ess of  concentration  of  wealth,  resources  and  power 
into  a  few  hands.  We  see  about  us  billion-dollar 
industrial  trusts  controlling:  every  avenue  of  opportu- 
nity and  business,  and  putting  forth  the  mailed  hand 
on  the  government  itself.  These  preat  industrial 
combinations  are  plundering  the  people  of  this  coun- 
try, transportation,  manufacturing,  mining,  and  noth- 


Markets   and  Rural  Economics  61 

ing  is  allowed  to  interfere  with  "business,"  the  god 
of  the  age. 

There  are  two  kinds  of  combinations  in  "restraint 
of  trade";  those  held  under  signed  agreements  be- 
tween corporations,  companies,  or  individuals,  and 
those  operating  under  a  "gentlemen's  agreement." 
The  Sherman  law  is  an  attempt  to  reach  the  former. 
There  is  no  law,  State  or  National,  that  reaches  the 
latter.  There  is  no  more  oppressive  trust  than  the 
Lumber  Trust,  but  the  Sherman  law  does  not  reach 
it.  It  is  founded  on  "a  gentlemen's  agreement."  By 
an  embargo  we  limit  our  coastwise  trading  to  Amer- 
ican vessels.  Under  the  "gentlemen's  agreement" 
this  coastwise  shipping  is  under  an  absolute  trust. 
The  iron  hand  of  the  law  was  brought  to  play  on 
the  Standard  Oil  Company  and  it  was  ordered  to  dis- 
solve. It  proceeded  to  do  so,  and  oil  went  up  to 
pay  the  additional  expense  of  operating  several  com- 
panies instead  of  one. 

It  is  operating  under  the  elusive  but  effective  trust 
of  the  "gentlemen's  agreement."  Forty-odd  prose- 
cutions have  been  brought  under  this  national  law 
and  seldom  have  material  benefits  resulted. 

Speculators  in  grain,  tobacco,  cotton,  etc.,  through- 
out the  country,  agree  to  divide  territory  and  not  bid 
against  each  other.  When  an  interloper  drops  in 
they  combine  to  drive  him  to  the  wall  and  then  go 
back  to  their  old  trade.  They  have  no  legal  contract 
to  that  effect.  "There  is  absolutely  nothing  to  pre- 
vent anyone  from  going  anywhere  at  any  time  and 
buying  anything  he  chooses,  and  paying  whatever  he 
has  a  mind  to  pay,"  is  what  we  are  told  by  them; 
every  word  of  which  is  absolutely  true,  so  far  as  any 
binding,  legal  contract  or  agreement  is  concerned; 


62  Markets    and   Rural  Economics 

but  the  "gentlemen's  agreement"  is  there.  The  boy- 
cott is  often  operated  in  the  same  way. 

When  Rome  went  down,  and  3,000  men  owned 
the  empire,  Crassus,  the  richest  Roman  of  them  all, 
who  made  his  wealth  dealing  in  slaves  and  mines, 
and  was  defeated  in  Mesopotamia  by  Sorena,  where 
20,000  Roman  soldiers  were  sacrificed,  was  worth 
only  $12,000,000,  the  income  of  John  D.  Rockefeller 
for  one  year. 

Pompey  was  worth  $3,500,000;  but  Joseph  Leiter, 
an  American,  lost  as  much  by  the  change  of  the 
chalk  mark  on  the  board  of  the  Chicago  wheat-pit. 

Alexander  is  reputed  to  have  conquered  the  world 
in  his  day,  but  all  the  ransoms  he  ever  wrung  from 
conquered  foes  would  not  equal  the  contributions  of 
the  American  people  to  the  Vanderbilts  and  Goulds. 

Pizarro  robbed  the  Incas  of  Peru  of  treasures  that 
made  Spain  the  most  powerful  nation  of  Europe,  but 
his  extortions  were  not  equal  to  the  purse  banked  by 
our  corporation  on  water-stock. 

Warren  Hastings  despoiled  India  of  vast  treas- 
ures, for  which  he  was  tried  at  the  bar  of  the  House 
of  Lords,  and  Burke,  Sheridan,  and  Fox  hurled  philip- 
pics at  him  that  will  live  in  invective  literature  for- 
ever, but  the  tribute  he  took  from  the  princes  of 
India  is  overshadowed  by  the  amount  contributed 
by  a  guillible  public  to  the  leeches  of  the  New  York 
Exchanges. 

And  still  we  slumber  with  a  false  sense  of  security, 
and  refuse  to  believe  that  each  voter  in  America  is 
responsible  for  every  wrong  that  is  tolerated.  There 
is  nowhere  else  to  put  the  blame.  Voting  for  men 
before  you  know  what  they  will  do  is  the  folly  of 
the  age.  To  shun  the  responsibility  imposed  by  a 
republic  is  to  invite  monarchy.  A  despotism  of  greed 


Markets   and  Rural   Economics  63 

reigns  under  the  protection  of  privilege — sanctioned 
by  those  who  pay  the  bills. 

Are  we  incapable  of  forgetting  the  little  questions 
and  solving  the  big  problems  of  the  day? 

CHARGES    AGAINST    COMBINATIONS 

The  evils  charged  against  large  combinations  are 
well  known.  These  include  the  power  to  exploit  the 
producer  and  consumer  by  depriving  them  of  a  com- 
petitive market,  thus  making  the  prices  of  the  raw 
material  unduly  low,  and  those  of  the  finished  com- 
modity unduly  high;  the  concentration  of  power,  some- 
times perilous  in  a  few  hands,  through  holding  com- 
panies; the  ruin  of  competition  in  a  given  locality  by 
selling  at  prices  below  the  cost  of  production;  the 
selling  of  one  variety  of  goods  at  less  than  cost  for 
the  purpose  of  driving  from  the  field  a  rival  who 
produces  chiefly  that  variety;  refusing  to  furnish  goods 
at  trade  rates  to  merchants  who  buy  anything  from 
rival  producers,  or  who  refuse  to  maintain  list  prices 
as  required  by  "sellers'  agreements";  the  use  of  pat- 
ents to  protect  what  is  not  patented;  checking  im- 
provements in  methods  of  production  when  monopoly 
is  successfully  assured;  the  exploitation  of  investors 
by  the  manipulation  of  stocks  and  securities,  and  the 
buying  up  and  suppression  of  useful  inventions  to 
prevent  their  introduction  from  diminishing  the  prof- 
its of  monopoly. 

CERTAIN  ADVANTAGES  CLAIMED 

Among  the  advantages  claimed  are  economies  in 
production  and  distribution,  the  greater  use  of  by- 
products; steadier  employment  of  labor,  and  at  better 
wages;  better  protection  against  industrial  accidents; 
more  command  over  international  trade;  a  command 
of  the  best  ability;  assurance  of  a  steady  market,  and 
avoidance  of  those  fluctuations  which,  under  old  com- 


64  Markets   and   Rural   Economics 

petitive  conditions,  so  often  brought  disaster  alike 
to  employer  and  employed,  and  the  standardization 
of  products,  so  that  dealer  and  ultimate  consumer 
know  exactly  what  they  are  purchasing. 

As  to  what  should  be  done  with  the  trusts  the  best 
thinkers  of  the  day  differ  widely.  The  theories  may 
be  grouped  under  three  heads: 

1 i )  That  monopoly  is  natural  and  should  be  ac- 
cepted and  regulated. 

(2)  That  monopoly  is  artificial  and  never  could 
have  grown  up  through  economy;  that  size  increases 
efficiency  up  to  a  certain  point  and  then  reaches  the 
law  of  diminishing  returns;  that  our  biggest  monop- 
olies have  obtained  their  power  by  special  privileges 
or  by  illegal  means. 

(3)  That  monopolies   are   the   natural   result  of 
industrial  development;  that  they  are  more  economical 
than  competition;   that  government  regulation   is  a 
failure  and  government  ownership  is  the  only  rem- 
edy. 

/TSome  are  willing  for  the  government  to  take  over 
(certain  monopolies,  but  want  to  draw  the  line  against 
general  government  ownership.  Just  where  to  draw 
the  line  would  obviously  be  a  subject  for  endless  con- 
tention and  discussion. 

It  is  argued  by  the  second  group  that  the  point  of 
diminishing  returns  is  reached  sooner  under  govern- 
ment than  under  private  management.  It  is  com- 
monly admitted  that  the  government  itself  could  be 
run  as  effectively  and  judiciously  as  it  is  on  several 
hundred  millions  less  than  it  now  takes.  Were  it 
run  as  an  individual  would  run  his  business  or  a  cor- 
poration would  operate  its  business  enormous  ex- 
penses would  be  lopped  off. 

The  point  of  diminishing  returns  is  reached  when 


Markets   and  Rural  Economics  65 

a  concern  obtains  an  absolute  monopoly.  The  sharp- 
ening effect  of  competition  is  gone;  the  need  for  alert- 
ness no  longer  exists  in  adopting  improved  devices; 
economy  is  not  so  pressingly  necessary,  and  that  in- 
dolence born  of  satisfaction  comes  into  the  equation. 
Economic  efficiency  does  not  necessarily  increase  with 
size  of  business.  Plenty  of  instances  can  be  cited 
to  prove  this  statement.  The  enormous  dividends 
made  for  the  stockholders  of  our  larger  trusts  were 
not  made  so  much  because  of  economic  efficiency  as 
from  market-domination.  When  we  turn  from  the 
great  trade-dominating  trusts  to  the  trusts  that  have 
never  risen  to  the  point  of  crushing  competition  we 
find  a  condition  where  the  competitors  have  a  market 
steadily  encroaching  upon  the  larger  trusts.  It  even 
takes  place  where  there  is  an  almost  complete  monop- 
oly. Twenty  years  ago  the  sugar  trust  held  95  per 
cent,  of  the  American  market;  in  1911  it  held  only 
43  per  cent.  Monopoly  does  not  insure  maintenance 
of  quality  in  the  material  turned  out.  After  an  in- 
vestigation by  the  Interstate  Commerce  Commission 
the  figures  showed  that,  during  the  first  decade  of 
the  organization  of  the  Steel  Trust,  a  deterioration 
in  the  quality  of  steel  rails  resulted  in  increasing  de- 
railments from  72  accidents  in  1902  to  249  in  1910. 
The  United  States  Steel  Corporation  had  a  smaller 
proportion  of  the  steel  business  of  the  United  States 
than  it  had  in  1901.  There  has  also  been  a  decline 
in  the  rate  of  earnings  of  the  Steel  Trust  on  its  in- 
vested capital.  At  the  beginning  of  the  century  Eu- 
rope was  alarmed  over  our  invasion  of  their  markets. 
Then  came  our  great  combinations.  In  1900  Ger- 
many exported  iron  and  steel  1,800,000  tons,  and  in 
1910  she  exported  nearly  5,000,000  tons.  We  went 
from  1,154,000  tons  to  1,534,000  tons,  and  thirty 


66  Markets    and   Rural   Economics 

per  cent,  of  the  steel  corporation's  plants  laid  idle. 
The  increase  in  the  cost  of  ore  in  America  put  us 
out  as  competitors,  while  Germany  and  England  were 
able  to  keep  down  the  cost  of  production  and  thereby 
outdistance  us  in  the  world  markets. 

In  social  efficiency  the  big  trusts  have  proved  that 
they  cared  nothing  for  their  workers  except  for  the 
profits  earned.  They  have  lowered  the  standard  of 
citizenship  by  resorting  to  the  lowest  stratas  of  so- 
ciety in  the  remotest  corners  of  the  earth  to  get 
cheap  labor. 

The  lesson  for  the  farmer  to  draw  from  all  the 
examples  of  the  immense  wealth  is  that  none  of 
those  who  possess  this  wealth  got  hold  of  it  by  the 
methods  pursued  by  the  farmers  as  a  class.  They 
did  not  follow  competition  to  the  limit  as  farmers 
have  done.  They  did  not  auction  their  wares,  goods, 
products,  services,  etc.,  but  regulated  the  supply  to 
demand  at  a  schedule  rate  and  made  millions. 

Now  there  is  one  kind  of  monopoly  of  which  it  is 
well  to  study  and  understand  the  relationship  such 
monopolies  bear  to  other  monopolies  in  the  economics 
of  the  day.  I  refer  to  the  Cooperative  Monopoly. 

In  what  particular  is  it  distinguished  from  all  other 
monopolies? 

In  the  fact  that  it  is  not  run  for  private  gain. 

Does  it  matter  how  large  a  business  is  or  how 
much  of  a  complete  monopoly  it  has  if  it  is  run  on 
the  cooperative  plan  and  is  not  allowed  to  extort  from 
the  public?  If  all  the  steel  business  in  the  world  were 
consolidated  into  one  company  and  the  capital  in- 
vested only  allowed  a  dividend  equal  to  the  average 
increase  in  wealth,  the  balance  of  the  profits  to  be 
distributed  to  the  workers,  and  the  public  be  protected 
from  extortion,  would  there  be  anything  to  alarm  us, 


Markets   and  Rural   Economics  67 

from  an  economic  standpoint,  in  the  operation  of 
such  a  monopoly?  If  the  worker  gets  the  full  re- 
turn for  his  labor  and  the  purchaser  gets  full  value 
received  for  his  money  which  is  paid  for  the  laborer's 
product,  there  is  nothing  left  between  for  graft  or 
parasites.  Usually  in  deciding  how  much  is  due  the 
brain  worker,  and  how  much  is  due  the  muscle  worker, 
the  brain  worker  gets  the  lion's  share.  Were  muscle 
workers  as  well  remunerated  as  brain  workers  it  is 
argued  that  the  inducement  to  become  a  brain  worker 
would  not  be  sufficient  to  encourage  brain  workers 
to  forge  ahead  and  do  the  great  things  that  are  needed 
to  be  done  and  are  being  done  now. 

Suppose  all  of  our  trusts  and  monopolies  were  com- 
pelled to  cooperate  with  each  other  and  with  the  pub- 
lic, brought  to  a  physical  valuation,  and  made  to  fol- 
low the  Rochdale  principle  in  the  distribution  of  prof- 
its, would  not  the  terrors  of  monopolies  be  destroyed 
and  the  advantages  be  retained? 

LESSON  VI 

What  is  a  corporation  ? 

Where  and  when  did  corporations  originate? 

What  is  the  purpose  of  a  corporation? 

Where  have  they  been  used  to  the  greatest  extent? 
Why? 

What  would  result  if  corporations  were  abolished? 

How  many  kinds  of  corporations  ?     Describe  each. 

What  percentage  of  the  industries  of  the  country 
is  carried  on  by  corporations? 

How  many  workers  do  they  employ? 

What  does  a  corporation  have  to  market? 

How  many  kinds  of  service  are  there? 


68  Markets    and   Rural  Economics 

Give  an  account  of  how  railroads  market  passenger 
service. 

Give  an  account  of  how  railroads  market  freight 
service. 

Give  an  account  of  how  shipping  companies  market 
passenger  and  freight  service. 

Give  an  account  of  how  life  insurance  companies 
market  service. 

Give  an  account  of  how  property  insurance  com- 
panies market  service. 

Describe  the  methods  of  National  Banks  in  selling 
service. 

Describe  the  methods  of  State  Banks  in  selling 
service. 

Explain  how  coal  mining  companies  sell  their  out- 
put. 

Explain  how  iron  mining  companies  sell  their  out- 
put. 

Explain  how  silver  mining  companies  market  their 
output. 

Explain  how  gold  mining  companies  market  their 
output. 

Which  is  the  more  expensive,  the  marketing  system 
of  the  mining  companies  or  of  the  manufacturers? 
Why? 

LESSON  VII 

What  is  a  trust? 

At  what  period  did  the  trust  have  its  rise? 

Give  the  cause  of  the  trust. 

What  are  its  uses? 

What  are  its  abuses? 

How  many  kinds  of  trusts  are  there? 

What  is  the  difference  in  effect  between   a  legal 


Markets   and  Rural  Economics  69 

trust  and  one  based  on  a  ''gentlemen's  agreement"? 

Name  some  of  each. 

Is  there  such  a  thing  as  a  trust  based  on  the  Roch- 
dale theory  of  cooperation? 

What  can  you  say  of  anti-trust  legislation :  State, 
National? 

What  kinds  of  uBig  Business"  should  be  exempt 
from  anti-trust  legislation  ? 

Is  a  money  trust  possible? 

If  so,  how  brought  about? 

How  could  it  be  prevented? 

LESSON  VIII 

Define  monopoly — public  and  private. 

Based  on  commercial  achievement;  based  on  fran- 
chise. 

Industrial. 

Commercial. 

Trust  monopoly. 

Cooperative  monopoly. 

Are  some  monopolies  desirable?    If  so,  what  kind? 

Are  some  undesirable?    If  so,  what  kind? 

Should  monopolies  be  owned  or  controlled? 

If  controlled,  to  what  extent? 

Which  is  the  better,  cooperative  ownership  or  pub- 
lic ownership? 

What  is  meant  by  uthe  spirit  of  the  shop"? 

Is  it  desirable  to  have  and  encourage? 

Where  is  it  encouraged  to  the  highest  degree? 

What  can  you  say  as  to  the  legislation  on  trusts 
and  monopolies? 

State  and  National? 

Is  there  such  a  thing  possible  as  a  political  monop- 
oly? 


70  Markets    and   Rural  Economics 

If  so,  how?  And  what  would  be  the  remedy? 

What  have  monopolies  to  do  with  markets? 

Do  monopolies  exist  as  entities  in  law? 

Do  they  buy  and  sell? 

What  is  "watered  stock"? 

What  has  watered  stock  got  to  do  with  the  high 
cost  of  living? 

Do  millionaires  "consume"  the  wealth  they  obtain? 

How  is  wealth  "squandered"?  What  becomes  of 
squandered  wealth? 

Would  a  cooperative  monopoly  be  desirable? 

If  so,  why?     If  not,  why? 


CHAPTER  VII 

MARKETING  BY  WAGE-EARNERS 

Wage-earners  have  something  to  market.  It  is 
their  time,  service,  and  skill.  So  long  as  they  are 
not  organized  they  sell  it  to  the  highest  bidder  in 
competition  with  the  lowest  bidder  among  their  fel- 
low wage-earners.  Necessity  is  not  long  in  overtak- 
ing the  mass  of  wage-earners  when  out  of  employ- 
ment. This  eternal  tugging  of  human  need  keeps  the 
hireling  ever  on  edge  for  a  job.  In  finding  a  market 
for  his  service  he  often  finds  it  hard  to  get  employ- 
ment at  wages  that  mean  a  decent  living.  In  this 
extremity  laborers  organize,  place  a  price  on  their  la- 
bor and  prescribe  conditions  under  which  they  are 
willing. to  work.  If  the  employer  refuses  to  accede 
to  the  demands  the  organized  laborers  go  on  a  strike. 
To  quit  work  is  easy;  to  live  without  work  is  impos- 
sible. It  becomes  a  battle  between  capital  and  hun- 
ger. Often  millions  of  dollars'  worth  of  property 
lie  idle  and  deteriorate,  and  thousands  suffer  for  want 
of  the  necessities  of  life  while  the  struggle  is  on. 
When  the  employer  makes  a  demand  on  employees 
which  they  refuse  to  comply  with,  the  employer  may 
close  business,  and  a  lockout  is  the  same  as  a  strike 
only  it  is  the  employer  who  is  on  the  strike. 

Reverse  the  position  of  the  employers  and  the  em- 
ployees and  we  would  have  the  same  conditions.  It 
is  merely  a  question  of  whose  ox  is  gored.  Capital 


72  Markets   and  Rural  Economics 

is  prone  to  arrogance  and  tyranny;  so  is  labor.  Labor 
has  learned  that  it  is  competition  that  renders  it 
helpless.  Labor  sees  capital  eliminate  competition 
by  organizing;  capital  taught  the  lesson  of  mastery 
and  labor  is  copying. 

Rockefeller  made  his  millions  by  crushing  out  com- 
petition. 

Carnegie  made  his  millions  by  monopolizing  the 
steel  business. 

Railroad  magnates  have  made  their  millions  by 
getting  control  of  the  carrying  trade  in  certain  ter- 
ritory. 

There  are  various  ways  to  eliminate  competition: 
by  superior  business  management,  by  legislative  en- 
actment, by  copyright,  by  secret  process,  etc. 

The  superiority  of  business  management  is  shown 
in  the  Marshall  Field  and  John  Wanamaker  stores. 

Legislative  enactment, is  the  cause  of  the  greater 
number  of  the  great  fortunes  of  the  day.  The  pro- 
tective tariff  is  professedly  to  eliminate  foreign  com- 
petition. The  abuse  of  this  principle  has  been  the 
fruitful  source  of  much  of  our  trust  prosperity.  Ex- 
clusive franchises  have  built  up  the  fortunes  of  many 
millionaires.  There  is  scarcely  a  large  city  in  Amer- 
ica that  has  not  at  some  time  granted  a  franchise 
for  railway,  light,  and  water  supply  and  allowed  the 
promoters  to  bank  piles  of  unearned  wealth  wrung 
from  the  tax-payers  of  the  city. 

Buying  up  the  source  of  supply  of  some  necessity 
or  luxury  and  arbitrarily  pricing  it  to  the  public  is 
one  of  the  commonest  of  commercial  methods  of 
financial  legerdemain. 

A  copyright  is  considered  the  most  legitimate  way 
of  eliminating  competition.  This  is  due  for  giving 


Markets   and  Rural  Economics  73 

to  the  world  a  new  idea,  and  upon  new  ideas  we 
build  civilization. 

Secret  process  of  manufacture  is  the  twin  brother 
to  the  copyright  method  of  making  the  world  pay 
a  premium  for  knowledge.  In  the  long-ago,  schools 
where  the  arts  and  crafts  were  taught  were  secret. 
This  was  to  eliminate  competition.  It  was  in  this 
manner  that  Masonry  had  its  origin.  They  were  lob- 
byists, too,  even  in  that  far-away  time,  for  they  had 
themselves  exempt  from  taxation,  and  that  was  the 
origin  of  the  title  of  Freemasons. 

Exclusive  knowledge  is  the  surest  way  of  eliminat- 
ing competition.  This  is  what  gives  the  graduate  the 
advantage  over  the  non-graduate  in  the  professions — 
at  least  it  is  supposed  to,  and  usually  does.  Why 
would  one  care  to  prepare  himself  for  certain  work 
by  years  of  study  if  it  did  not  give  him  an  advantage 
over  those  who  will  not  make  this  preparation?  And 
the  purpose  of  gaining  this  advantage  is  to  enable 
one  to  minimize  competition  in  that  particular  line  of 
work  or  profession  he  aims  to  follow. 

Skilled  labor  has  the  advantage  of  unskilled  labor 
on  the  field  of  competition  for  the  reason  that  it  has 
a  monopoly  on  the  knowledge  necessary  to  conduct 
the  business  or  perform  the  labor.  Why  have  the  lo- 
comotive engineers  made  a  greater  success  of  their 
organization  than  other  railroad  employees?  Simply 
and  solely  because  they  had  a  monopoly  on  the  skill 
in  their  particular  line  of  business;  they  made  their 
demands,  and  refused  to  work  unless  their  demands 
were  conceded  by  the  railroads;  could  tie  up  every 
branch  of  road  in  the  country  in  a  day,  and  carried 
no  one's  grievances  but  their  own.  Being  limited  in 
numbers,  and  absolutely  indispensable  to  the  railroad 
business,  the  demands  of  the  engineers  have  been 


74  Markets    and   Rural   Economics 

granted  one  by  one  till  they  are  a  well-paid  and  well- 
treated  class  of  laborers.  They  have  persistently  re- 
fused to  enter  sympathetic  strikes  and  carry  the  bur- 
den of  other  organized  bodies  of  employees  and  have 
therefore  been  masters  of  the  situation. 

So  it  is  throughout  the  realm  of  organized  labor. 
Power  means  mastery,  whether  justified  or  not,  and 
mastery  in  the  industrial  world  is  a  question  of  elim- 
inating competition  and  possessing  a  monopoly  on 
labor,  its  service  and  products. 

The  uopen  shop"  is  one  that  employs  either  union 
or  non-union  employees.  The  "closed  shop"  is  one 
that  employs  none  but  union  labor.  A  strike  occurs 
when  the  employees  quit  work  for  a  real  or  supposed 
grievance,  and  is  usually  ordered  by  organized  labor. 
A  lockout  occurs  when  the  employer  closes  down, 
either  because  his  business  is  not  paying  or  because 
of  some  difficulty  with  the  employees.  The  blacklist 
is  used  where  a  man  who  is  dismissed  from  one  place 
and  his  name  is  furnished  to  others  to  keep  the  dis- 
missed laborer  from  getting  employment.  The  boy- 
cott is  the  endeavor  of  a  number  to  stop  customers 
from  patronizing  a  firm  because  of  some  real  or  imag- 
inary grievance.  Each  of  these  are  weapons  of  war- 
fare in  our  industrial  struggle  and  evolution. 

Capital  is  justified  in  organizing;  labor  is  justified 
in  organizing;  Society  is  justified  in  organizing  and 
compelling  a  cooperation  between  Labor  and  Capital; 
and  Society  has  a  right  to 'dictate  the  terms  of  the 
cooperation.  It  is  the  duty  and  opportunity  of  this 
generation  to  solve  these  most  intricate  problems. 


Markets   and  Rural  Economics  75 

LESSON  IX 

What  is  a  wage-earner? 

What  have  wage-earners  to  sell? 

What  is  the  difference  between  the  "commodity" 
sold  by  a  hired  hand  and  that  sold  by  a  railroad? 
By  an  insurance  company? 

How  many  kinds  of  "hirelings"  are  there? 

What  is  the  difference  between  a  "job"  and  a 
"position"? 

What  is  your  opinion  as  to  the  brain  worker  and 
the  muscle  worker  either  doing  the  work  of  the  other? 

Has  the  manual  laborer  or  the  mental  worker  been 
the  more  favorable  to  equal  pay  for  equal  time? 

Which  has  been  organized  to  the  greater  extent? 

Give  instances  of  the  origin  of  organization  of 
each  class. 

What  have  you  to  say  of  the  open  shop? 

What  of  the  closed  shop? 

What  have  you  to  say  of  strikes? 

What  have  you  to  say  of  lockouts? 

What  have  you  to  say  of  the  black-list? 

What  have  you  to  say  of  the  boycott? 

What  has  the  price  paid  to  wage-earners  to  do 
with  the  price  of  farm  commodities? 


CHAPTER  VIII 
MARKETING  BY  THE  FARMER 

Old  methods  of  marketing  are  gone  forever.  Local 
markets  are  no  longer  the  dependence  of  either  coun- 
try or  city  producers.  Home  production  exclusively 
for  home  consumption  is  a  thing  of  the  past.  Mer- 
chandising today  is  quite  different  from  merchandis- 
ing in  the  Middle  Ages,  or  in  ancient  times.  The 
one-price  policy  and  honesty  have  won  out  in  modern 
times.  Changes  in  marketing  methods  have  taken 
place  in  every  department  of  business  more  than  in 
farming. 

Every  vocation  except  farming  seeks  to  eliminate 
competition  in  every  way  possible. 

"Back  to  the  farm"  has  been  the  slogan  for  years 
from  platform,  press,  and  forum. 

The  farmer  has  not  objected. 

He  has  joined  the  cry. 

Why  should  he  do  this? 

He  has  not  learned  the  lesson  of  the  great  economic 
law  of  elimination  of  competition. 

Why  has  farming  begun  to  pay  more  than  usual 
of  late?  There  are  various  reasons,  but  one  of  them 
is  that,  in  spite  of  all  that  can  be  said  in  praise  of 
farm  life  and  the  profits  of  farming,  those  who  wrere 
born  and  reared  on  the  farm  refused  to  continue  the 
business  and  sought  other  vocations.  This  has  drained 
the  farms  of  the  tillers  and  left  a  few  farmers  the 
task  of  feeding  the  teeming  millions.  Thus  by  a 


Markets   and  Rural  Economics  77 

process  of  automatic  elimination  there  is  no  longer 
the  fierce  competition  among  farmers  that  there  used 
to  be.  The  farmers  constituted  90  per  cent,  of  the 
population  at  the  beginning  of  the  government;  now 
they  are  only  about  one-third  of  the  population. 

The  increased  power  of  production  has  urbanized 
the  world. 

Prescott  F.  Hall,  in  the  January  (1912)  issue  of 
the  North  American  Review,  says  : 

uTo  take  the  classical  error  on  the  subject,  we 
have  been  told  repeatedly  that  on  the  one  hand  it 
was  the  conquering  Goths  and  Vandals,  and  on  the 
other  hand  their  own  vice  and  luxury,  which  cost 
the  Romans  their  Empire.  The  real  cause  of  the 
fall  of  Rome  was  neither  of  these." 

In  the  February  issue  of  The  World  Today  is  an 
article  by  a  man  who  is  reputed  to  be  the  greatest 
living  writer  of  Roman  history,  Dr.  Ferrero,  an  Ital- 
ian historian.  He  uses  the  following  language : 

There  never  was  in  history  a  richer,  more 
knowing,  more  powerful,  more  daring 
period  than  ours.  Therefore,  to  many  it 
will  seem  strange  to  think  that  in  the  midst 
of  such  splendors  there  may  be  re-enacted 
that  terrible  ancient  story  of  the  last  cen- 
turies of  the  Roman  Empire,  which  was  one 
of  the  most  deplorable  episodes  in  the  his- 
tory of  the  world. 

And  yet,  it  is  beginning  to  be  reenacted. 
The  showy  wealth,  the  clamorous  triumphs 
of  modern  civilization  do  not  conceal — on 
the  contrary,  they  reveal — to  him  who  stud- 
ies in  philosophic  spirit  the  fall  of  the  Ro- 
man Empire.  Among  the  similarities  the 
most  important  is  the  malady  that  unmade 
the  great  body  of  the  Empire  and  slowly, 


7 8  Markets    and   Rural  Economics 

subtly,  insidiously,  begins  to  infest  the  world 
of  today — the  excess  of  urbanism. 

The  condition  of  the  peasant  in  the  sol- 
iditude  of  the  depopulated  country  district 
became  ever  gloomier  and  more  pitiable 
in  proportion  as  the  cities  became  larger  and 
more  beautiful  and  fuller  of  diversions  and 
gaieties. 

The  first  grave  symptom,  and  the  one 
felt  by  everyone,  is  that  very  excess  of  ur- 
banism which  was  the  ruin  of  ancient 
Rome.  The  country  has  been  too  much 
abandoned  during  the  last  half  century,  and 
agriculture  too  much  neglected — exactly 
what  began  to  happen  in  the  Roman  Empire 
at  the  commencement  of  the  second  century. 

Let  us  hear  what  the  eminent  German  writer,  Kalt- 
hoff,  has  to  say  on  this  matter  in  his  work,  uThe 
Rise  of  Christianity."  Speaking  of  the  exploitation 
of  the  farmer  in  Ancient  Rome,  he  says : 

The  noble  Roman  becomes  a  relentless 
exploiter  of  the  poor  peasant.  He  is  a  spec- 
ulator on  a  grand  scale  and  menaces  the 
State.  .  .  .  There  is  no  political  and 
social,  and  certainly  no  ethical  resistance  to 
the  evils  of  this  great  concentration  of  cap- 
ital. The  capitalistic  accumulation  on  an 
agrarian  basis  has  the  whole  power  of  the 
State  at  its  disposal  at  Rome — the  army, 
the  fleet,  the  law  and  the  government.  . 
So  the  great  serpent  that  is  to  strangle  the 
finest  strength  of  Rome,  its  peasantry, 
brings  its  coils  closer  and  closer  together. 


Markets   and  Rural   Economics  79 

And  let  us  ask  what  was  the  end  of  it  all.  Listen 
a  moment  to  what  Tiberius  Gracchus  said: 

The  wild  beast  has  its  cavern  and  its  den; 
every  one  of  them  has  its  place  of  refuge. 
But  those  who  are  called  the  lords  of  the 
earth  have  nothing  left  but  light  and  sun- 
shine. There  is  not  a  stone  that  they  can 
call  their  own  and  lay  their  weary  heads  to 
rest  on.  .  .  .  And  every  effort  to  re- 
form the  situation  in  the  Roman  world  com- 
pletely failed. 

There  is  a  cause  for  this  excess  of  urbanism.  There 
are  different  causes,  of  course,  but  one  of  the  prime 
causes  is  that  the  farmer  is  not  getting  his  just  pro- 
portion of  what  the  consumer  is  paying  for  his  prod- 
ucts. Until  farming  pays  as  much  on  the  capital  in- 
vested, as  is  paid  in  other  lines  of  business,  the  cry 
of  "back  to  the  farm"  will  not  be  heeded. 

When  this  excess  of  urbanism  brought  Rome  face 
to  face  with  a  crisis  she  sought  to  remedy  the  evil 
by  putting  labor  to  work  on  the  highways  and  on 
public  improvements  generally.  The  cities  were 
beautified  and  immense  structures  for  public  amuse- 
ments were  built.  The  resources  of  the  cities  and  the 
government  were  poured  out  to  keep  labor  quiet. 
This  kind  of  work  brought  only  temporary  relief. 
The  great  underlying  cause  was  neglected.  When 
improvements  were  completed  and  treasuries  were 
exhausted,  labor  was  again  clamoring  for  work. 
Corrupt  politicians  bought  their  support  by  the  droves. 
Governments,  local  and  general,  became  a  seething 
cauldron  of  corruption.  Rome  had  not  provided  for 
an  increase  of  the  power  of  agricultural  production. 


8o  Markets   and  Rural  Economics 

She  had  not  legislated  to  keep  lands  in  the  hands  of 
the  tillers  of  the  soil.  Rome  had  taken  a  superficial 
view  of  things  and  had  failed  to  exemplify  statesman- 
ship in  applying  remedies  for  excessive  urbanism. 

Shall  we  profit  nothing  by  the  example,  and  fall 
into  a  similar  error?  We  had  better  foster  produc- 
tion and  distribution  than  to  squander  on  brick  and 
mortar,  subvent  corporate  greed,  making  assets  of  a 
maudlin  sentiment,  and  "pork-barrel"  appropriations 
through  Congresses  by  pandering  to  promiscuous  par- 
asites because  they  have  the  gall  to  ask  for  more. 

The  best  agricultural  States  we  have  are  decreas- 
ing in  rural  population,  the  small  towns  are  fewer, 
an3  landlordism  has  its  tightest  hold. 

Analyze  these  conditions  and  tendencies,  young  man 
of  America,  and  study  what  they  mean.  More  of 
the  rural  population  are  to  be  started  to  farther  ag- 
gravate over-urbanism.  You  must  face  the  future 
whether  you  wish  to  or  not.  We  have  evolved  away 
from  individualism  in  its  primitive  sense,  and  to  ig- 
nore the  fact  will  only  bring  the  result  that  must  ever 
follow  ignoring  facts. 

LESSON  X 

In  what  sense  is  the  farmer  a  manufacturer? 

In  what  sense  is  he  a  merchant? 

In  what  sense  is  he  a  consumer? 

What  were  the  old  methods  of  marketing  from 
the  farm? 

When  other  than  local  markets  were  used  what 
were  the  means  of  transportation? 

What  can  you  say  of  ancient  fairs?  Of  modern 
fairs? 


Markets   and  Rural  Economics  81 

What  caused  radical  changes  in  merchandising? 
Give  present  methods. 

What  can  you  say  as  to  the  segregation  of  in- 
dustries incident  to  the  use  of  improved  machinery? 

How  is  the  exchange  of  products  facilitated  by  the 
use  of  money,  banks,  credits,  clearing-houses,  etc.  ? 

What  can  you  say  of  the  cost  of  the  present  system  ? 

LESSON  XI 

What  has  been  the  percentage  of  decrease  of  farm- 
ers since  the  beginning  of  the  government? 

What  has  been  the  cause? 

What  is  the  result? 

Who  has  held  his  own  as  a  property  owner? 

What  is  the  cause  of  over-urbanization? 

Can  you  draw  any  parallels  from  history  of  over- 
urbanization? 

What  was  the  cause  of  over-urbanization  in  Rome? 

What  means  of  palliation  were  resorted  to  by  the 
general  and  municipal  governments  ? 

What  did  the  Roman  philanthropists  do  to  ward 
off  the  evil  day? 

Might  Rome  have  spent  her  money  to  better  ad- 
vantage ? 

Have  we  any  parallels  in  this  country? 

Is  there  any  significance  in  the  relationship  of  the 
rural  wealth  per  capita  and  the  number  of  small 
towns  in  a  State? 

Have  you  any  suggestions  as  to  what  should  be 
done  to  induce  people  to  stay  on  the  farm? 

Do  you  think  the  high  cost  of  living  in  cities  will 
have  this  effect? 

Do  you  consider  that  we  have  over-urbanization? 


82  Markets    and   Rural   Economics 

Is  over-urbanization  an  "evil"  or  is  it  rather  a 
"misfortune"? 

What  effect  has  the  drift  from  the  country  to  the 
town  and  city  had  on  markets? 


CHAPTER  IX 

COTTON  EXCHANGES 

Cotton  exchanges  are  incorporated  institutions  com- 
posed of  brokers  who  elect  their  own  members,  make 
their  own  rules,  limit  their  membership  and  do  not 
report  the  volume  of  their  business  to  the  public.  The 
chief  function  of  the  cotton  exchange  is  supposed  to 
be  to  furnish  a  place  and  the  means  by  which  buyers 
and  sellers  come  together  and  carry  on  their  business; 
but  the  chief  function  of  the  exchanges,  as  now  oper- 
ated, as  defined  by  Herbert  Knox  Smith,  in  his  ex- 
haustive report  while  commissioner  of  corporations, 
is  to  furnish  uniform  quotations  and  furnish  a  place 
to  hedge. 

The  manufacturer  of  cotton  goods  wants  to  know 
what  price  to  ask  for  his  goods  to  be  delivered  several 
months  ahead.  He  has  not  bought  the  raw  cotton 
from  which  he  is  to  make  the  cloth.  He  does  not 
know  what  it  will  cost  him.  So  how  is  he  to  price 
his  goods  to  his  customer?  A  cotton  merchant  comes 
to  the  manufacturer  and  offers  to  furnish  the  cotton  at 
a  specified  time  and  price.  The  trade  is  made.  The 
manufacturer  knows  what  to  ask  for  goods  to  be  made 
from  this  cotton,  as  the  price  it  is  to  cost  him  is  es- 
tablished so  far  as  he  is  concerned.  But  how  is  the 
cotton  merchant  to  know  but  that  he  will  have  to  pay 
more  for  the  cotton  he  has  sold  than  he  got  for  it, 


84  Markets    and   Rural  Economics 

or  is  to  get  for  it?  He  does  not  know.  It  is  up  to 
him  to  throw  the  risk  on  some  one  else.  He  goes  to 
the  exchange  and  buys  an  equal  amount  of  cotton  to 
be  delivered  at  the  same  time  of  his  delivery  to  the 
manufacturer.  His  buying  on  the  exchange  consists 
in  putting  up  a  margin  to  cover  the  probable  fluctua- 
tion between  the  date  of  purchase  and  date  of  deliv- 
ery, which  is  usually  $2  a  bale.  This  transaction  on 
the  exchange  is  called  a  hedge.  If  the  rise  and  fall 
of  spots  and  futures  remain  relatively  the  same  he  will 
neither  make  nor  lose  by  the  change  in  price.  If 
cotton  advances  in  price,  and  futures  advance  at  the 
same  ratio,  he  will  make  as  much  on  his  future  deal 
as  he  loses  on  his  spot  deal.  If  cotton  declines  he  will 
lose  on  his  future  deal  as  much  as  he  makes  on  his 
spot  deal. 

Then,  where  does  he  get  any  profit  out  of  the  two 
deals  taken  together? 

This  cotton  merchant  looks  up  the  market  before 
he  makes  an  offer  to  the  manufacturer,  and  makes  a 
price  at  so  many  points  above  present  price  so  as  to 
leave  a  margin  of  profit.  It  is  then  up  to  the  cotton 
merchant  to  get  his  cotton  as  cheap  as  possible,  and 
make  the  difference  between  the  market  quotation  and 
the  price  he  is  to  get  for  it. 

When  a  cotton  merchant  bought  his  hedge,  from 
whom  did  he  buy  it?  He  bought  it  through  his 
broker  from  some  one  who  was  willing  to  take  the 
risk  in  price  fluctuations.  It  might  possibly  be  some 
one  who  was  selling  a  hedge  to  cover  a  purchase  in 
spots,  but  more  likely  it  was  some  one  who  had  no 
cotton,  did  not  expect  to  have  any  and  could  not  get 
it  if  he  were  to  try.  He  is  apt  to  be  simply  a  specu- 
lator who  is  selling  short  in  the  belief  that  cotton  will 
go  down  before  the  date  specified  for  delivery.  The 


Markets   and  Rural  Economics  85 

buyer  and  the  seller  stake  their  margins  with  the 
broker  and  await  results,  the  same  as  in  any  other 
game  of  chance.  The  only  investment  is  the  amount 
of  the  commission;  the  hedge  is  simply  a  "stake.11 

Suppose  that  in  the  instance  above  related  the  price 
of  spot  cotton  goes  down  and  the  price  of  futures  goes 
up,  what  would  be  the  result?  The  cotton  merchant 
would  make  on  both.  On  the  other  hand,  if  the  price 
of  cotton  goes  up  and  the  price  of  futures  goes  down, 
the  merchant  loses  on  both  transactions. 

The  spinner  or  manufacturer  may  do  his  own  hedg- 
ing, and  then  buy  his  own  cotton  in  the  open  market 
as  he  needs  it. 

A  hedge  is  not  always  a  protection.  It  frequently 
acts  as  a  boomerang  to  the  hedger.  But  it  offers 
sufficient  guarantee  under  ordinary  circumstances  to 
induce  a  great  number  of  cotton  buyers  to  use 
it  when  they  are  carrying  cotton  which  they  have  not 
sold,  or  when  preparing  to  fill  orders  which  they  have 
sold. 

A  wide  market  furnished  hedgers  by  the  exchange 
is  made  possible  by  customers  of  the  exchange 
who  have  nothing  involved  but  their  margins.  So 
one  of  the  main  functions  of  the  exchange  as  now 
operated  is  to  furnish  speculators  a  place  to  win  or 
lose  in  a  game  of  chance  on  marginal  risks.  To  all 
intents  and  purposes  the  interest  of  this  class  of  ex- 
change patrons  is  the  same  as  the  interest  of  the  pa- 
trons of  the  "bucket  shop." 

A  bucket  shop  is  an  office  set  up  by  one  who  takes 
the  quotations  of  the  exchanges  as  a  basis  and  oper- 
ates by  taking  the  bets  of  all  customers  whether  they 
are  on  the  bull  or  bear  side  of  the  market.  Nothing 
is  contemplated  being  delivered  or  called  for  delivery. 
It  is  purely  a  gamble  on  the  fluctuations  of  the  market. 


86  Markets    and   Rural  Economics 

The  bucket  shop  manager  takes  chances  on  there  being 
more  losers  than  winners  among  his  customers.  Mar- 
gins are  staked  by  the  bucket  shop  patron  the  same 
as  when  dealing  on  the  exchange.  Nothing  is  af- 
fected in  price  by  the  bucket  shop,  as  it  has  no  con- 
nection whatever  with  dealing  in  any  commodity,  ex- 
cept to  use  future  quotations  as  a  basis  for  betting. 
Bucket  shops  have  been  outlawed  in  recent  years 
throughout  the  country. 

Each  contract  bought  or  sold  on  the  cotton  ex- 
change calls  for  the  delivery  of  the  cotton,  and  can 
be  enforced.  The  contracts  are  held  to  be  valid.  This 
would  give  the  buyers  a  chance  to  put  the  short  sellers 
in  a  hole  were  it  not  for  the  rules  governing  exchange 
deliveries.  When  cotton  is  contracted  for  on  the  ex- 
change it  is  simply  cotton — grade  has  nothing  to  do 
with  it.  A  buyer  cannot  contract  for  a  specific  grade 
or  quality  of  cotton.  Contracts  are  all  based  on 
"middling.11  You  buy,  say,  one  hundred  bales,  basis 
middling,  to  be  delivered  at  a  specified  date  at  a  speci- 
fied price.  The  seller  does  not  have  to  deliver  mid- 
dling or  any  other  specific  grade.  He  has  the  option 
of  selecting  any  grade  or  grades  he  chooses  within  the 
limit  of  eighteen,  and  tender  it  on  the  contract.  If  he 
does  not  want  to  deliver  at  all  he  is  certain  to  select 
such  cotton  as  cannot  be  used  by  the  purchaser  to  an 
advantage,  and  thereby  avoids  being  called  on  for  the 
spot  cotton.  On  the  New  York  Exchange  the  differ- 
ences in  value  between  the  various  grades  are  fixed 
by  a  board  which  meets  at  stated  intervals.  The  New 
Orleans  Cotton  Exchange  settles  the  differences  on  the 
commercial  basis,  i.  e.,  on  the  commercial  value  of 
each  grade  at  the  time  of  delivery.  The  New  York 
plan  gives  the  seller  a  still  greater  advantage  when 
called  on  to  deliver,  as  he  can  pick  out  the  grade  least 


Markets    and  Rural   Economics  87 

in  demand  and  of  least  relative  value  at  the  time  of 
delivery.  All  of  which  means  that  an  exchange  is  not 
primarily  a  spot  cotton  market.  In  fact  it  is  conceded 
that  not  ten  per  cent,  of  the  sales  are  ever  delivered. 

The  practice  of  giving  through  bills  of  lading  has 
also  operated  to  eliminate  the  cotton  exchanges  as 
spot  cotton  markets.  It  is  no  longer  necessary  that 
there  be  a  midway  station  where  buyer  and  seller 
meet  to  see  the  cotton  and  do  their  trading.  Hun- 
dreds of  millions  of  dollars'  worth  of  cotton  are 
bought  by  foreign  mills  without  the  purchaser  ever 
seeing  the  seller  or  ever  seeing  the  cotton  till  it  ar- 
rives at  the  purchaser's  warehouse.  It  is  bought  on 
grade,  staple  and  spinning  qualities,  the  seller  guaran- 
teeing it  to  come  true  to  contract. 

Often  there  is  a  battle  royal  on  the  exchange  be- 
tween the  bulls  and  bears,  when  millions  of  dollars  are 
involved,  and  whichever  way  the  tide  turns  means 
enormous  profit  or  loss  to  the  contending  parties.  We 
read  in  the  market  reports  of  ubear  raids"  and '"bull 
campaigns."  A  few  times  it  has  happened  that  men 
with  enormous  capital  at  their  command  have  quietly 
"cornered"  both  the  future  and  spot  markets,  and 
then  proceeded  to  make  demand  for  spot  delivery  on 
their  exchange  contracts.  The  bull  campaigners  were 
prepared  for  this  emergency  and  accepted  all  that 
was  tendered.  When  this  supply — kept  in  New  York 
for  the  purpose — was  exhausted,  good  cotton  had  to 
be  secured  by  the  sellers  to  fill  their  contracts.  So 
the  sellers  of  exchange  contracts  had  to  go  to  the 
very  ones  to  whom  they  were  bound  to  deliver  and 
first  buy  the  spot  cotton  and  deliver  it  right  back 
to  them  on  the  exchange  contracts.  Under  this  pres- 
sure cotton  has  been  bought  in  Europe  and  brought 
back  to  New  York  to  tender  on  "short"  contracts. 


88  Markets    and   Rural  Economics 

When  the  top  is  reached,  and  reaction  sets  in,  the 
only  way  the  bulls  can  save  themselves  is  to  turn 
bears  and  hammer  the  future  market  as  low  as  pos- 
sible while  they  pocket  margin  forfeits  as  the  price 
slips  downward  notch  by  notch. 

Suppose  the  short  sellers  cannot  get  the  cotton  at 
all;  how  can  they  be  forced  to  deliver?  That  is  cared 
for  by  the  broker  "covering"  for  his  client  before  the 
margin  is  exhausted.  This  process  lessens  the  num- 
ber carrying  the  load,  but  it  is  the  only  way  of  keeping 
solvency  of  operators. 

"Scalpers"  go  in  and  out  of  the  market  the  same 
day. 

If  a  broker  gets  an  order  from  a  customer  and  takes 
it  himself,  instead  of  offering  it  across  the  pit,  he  is 
said  to  "bucket"  the  order,  because  he  thus  assumes 
the  same  attitude  toward  his  customer  that  the  keeper 
of  a  bucket  shop  does.  This  is  forbidden  by  the  rules 
of  the  exchange,  and  should  a  broker  be  found  guilty 
of  practicing  it,  he  would  be  expelled  from  the  ex- 
change. 

The  expenses  of  the  exchanges  of  the  country  are 
not  definitely  known.  A  conservative  estimate  of  the 
commission  charges  on  the  transactions  of  the  New 
York  Cotton  Exchange  places  the  amount  at  $10,- 
000,000  a  year.  The  commissions  are  $15  a  hundred 
bales  to  those  who  are  not  members  of  the  exchange 
— $7.50  to  get  in  and  $7.50  to  get  out.  The  com- 
missions of  members  are  half  that  of  non-members. 

But  to  offset  this  it  is  shown  that  not  all  the  sales 
on  the  exchanges  are  bona  fide  transactions,  yielding 
these  regular  commissions.  There  are  what  is  called 
"matched  sales"  and  "washed  sales,"  and  a  process 
that  is  called  "wringing  out,"  all  of  which  yield  no 


Markets   and  Rural  Economics  89 

commissions  except  what  is  paid  the  floor  broker  for 
his  wage  service. 

"Matched  sales"  or  "washed  sales"  are  those  where 
a  member  of  the  exchange,  or  a  combination  of  them, 
have  a  private  understanding,  and  go  to  one  set  of 
brokers  and  order  them  to  sell  a  certain  amount  of 
cotton,  at  a  given  price,  and  then  go  to  another  set 
of  brokers  and  order  them  to  buy  the  same  quantity 
of  cotton  at  the  same  price.  The  purpose  to  be  served 
in  a  plot  like  this  would  be  to  make  a  ubear  raid." 
Suppose  a  coterie  of  men  find  out  on  a  certain  day 
that  they  are  badly  oversold,  say,  a  million  bales; 
and  that  if  they  can  make  a  decline  on  that  of  a  cent 
a  pound  they  can  clean  up  $<j, 000,000!  They  get 
together  and  agree  to  break  the  market  on  the  mor- 
row, say  one-quarter  cent.  They  divide  up,  and  each 
gets  a  broker  to  sell  ten  thousand  futures  five  points 
down  to  each  lot,  2,000  at  a  time.  Say  200,000 
are  thus  to  be  offered.  These  same  manipulators  get 
another  lot  of  brokers  and  instruct  them  to  go  on 
the  floor  and  buy  in  like  lots  and  prices.  The  two 
sets  of  brokers  do  not  know  anything  about  the 
scheme.  They  are  concerned  only  in  obeying  the 
orders  of  their  customers.  They  have  their  orders 
and  proceed  to  carry  them  out,  and  the  quotations 
decline  a  quarter  cent.  Not  a  cent  is  made  or  lost 
by  these  transactions  per  se,  but  the  decline  means 
over  a  million  rake-off  for  the  manipulators,  less  the 
wages  of  the  brokers. 

The  rules  of  the  exchange  do  not  allow  this — but 
to  prove  that  it  is  done — there  is  the  rub. 

"Wringing  out"  describes  the  condition  where  a 
purchase  goes  from  one  to  another  any  number  of 
times,  and  returns  to  the  original  seller;  when  ac- 
counts are  compared  after  the  day's  transactions  it 


90  Markets    and   Rural   Economics 

is  found  that  this  contract  will  "wring  out,"  and  the 
intermediary  men  are  eliminated,  and  thus  a  useless 
transfer  of  contracts  is  avoided. 

Quite  a  lot  of  legislating  has  been  done  against 
future  dealing  in  the  States.  Every  Southern  State 
except  two  has  outlawed  it.  Many  Northern  States 
have  done  the  same.  Several  attempts  have  been 
made  to  get  national  legislation  against  it,  but  with- 
out success.  The  lower  house  of  Congress  passed  a 
bill  prohibiting  dealing  in  cotton  futures  in  1910, 
and  again  in  1912,  but  neither  got  through  the  Sen- 
ate. The  Federal  government  could  prevent  it,  as 
it  did  the  Louisiana  Lottery,  by  denying  the  use  of 
any  means  of  interstate  communication  of  future  deal- 
ing transactions  where  there  was  no  intention  to  de- 
liver or  receive  that  upon  which  the  contract  was 
based. 

The  result  that  would  follow  an  abolition  of  future 
dealing  is  problematical.  It  would  depend  on  the 
conduct  of  the  farmers  themselves.  If  they  would 
assume  the  carrying  function,  and  feed  the  markets 
of  the  world  ever  gradually  with  their  products,  fu- 
ture dealing  would  fall  into  disuse  automatically. 
There  would  be  an  additional  cause  for  them  to  do 
this  if  future  dealing  were  prohibited.  Local  cotton 
buyers  would  be  less  willing  to  assume  the  risk  of 
buying  in  the  fall,  and  finding  sale  at  an  advanced 
price,  if  they  could  not  carry  a  hedge  to  cover  pos- 
sible losses. 

The  utility  of  this  local  cotton  market  is  doubtful. 
The  thing  that  is  the  most  convenient  is  not  always  the 
best.  It  is  far  more  expensive  than  a  system  need 
be  to  transfer  adequately  the  crop  from  the  cotton 
pens  to  the  looms.  There  is  little  competition  among 
local  buyers.  They  parcel  out  the  territory  and  do 


Markets   and  Rural  Economics  91 

little  interfering  with  each  other.  When  a  competitor 
"butts  in"  on  an  established  buyer  he  is  usually  put 
out  by  unfair  competition.  The  one  that  is  estab- 
lished, and  able  to  stand  the  strain,  will  proceed  to 
overbid  the  newcomer  till  the  intruder  is  compelled 
to  leave  the  field.  Cotton  is  in  the  meantime  lowered 
a  fraction  at  various  other  points  in  order  to  make  up 
for  the  loss  sustained  at  the  one  point  while  overbid- 
ding the  competitor.  After  competition  is  eliminated 
it  often  happens  that  one  left  as  master  of  the  field 
abuses  his  power  till  another  tries  the  game  of  com- 
petition again. 

The  only  substitute  the  farmers  have  for  the  ex- 
changes is  the  consolidated  warehouse  system,  with  a 
central  office  to  sell  and  guarantee  sales  to  come  to 
contract.  In  short,  to  do  as  the  big  concerns  all  do: 
organize  a  sales  system,  own  it,  control  it,  sell  through 
it,  and  refuse  to  sell  any  other  way. 

The  local  buyer  does  not  make  a  market  for  cot- 
ton; the  big  cotton  merchants  do  not  make  a  market 
for  cotton;  the  exchanges  do  not  make  a  market  for 
cotton;  the  manufacturers  do  not  make  a  market  for 
cotton;  the  wholesale  nor  retail  merchants  who  sell 
cotton  goods  do  not  make  a  market  for  cotton.  Then 
who  does?  The  1,500,000,000  people  who  inhabit 
the  earth  and  use  cotton  goods  in  a  thousand  different 
ways  make  the' market  for  cotton.  This  demand  is 
constant  and  permanent.  This  demand  created  by 
the  consumers  goes  to  the  retailer,  then  to  the  whole- 
saler, then  to  jobbers  or  to  the  mills,  then  from  the 
mills  to  anyone  who  has  the  cotton  and  will  deliver 
it  to  suit  the  convenience  of  the  mills.  If  the  farmer 
refused  to  sell  except  through  his  own  warehouse 
agencies  he  would  be  master  of  the  situation  the  same 
as  other  captains  of  industry  who  so  largely  master 
the  commercial  affairs  of  the  world. 


92  Markets    and   Rural  Economics 

LESSON  XII 

What  is  an  exchange? 

How  many  kinds  are  there? 

What  have  they  to  do  with  markets? 

What  is  a  bucket  shop? 

What  is  the  difference  between  a  bucket  shop  and 
an  exchange? 

What  is  a  "pit"? 

How  is  an  exchange  operated? 

How  are  records  of  sales  kept  and  reported? 

Where  are  the  leading  exchanges  of  the  world? 
Of  the  United  States? 

How  is  membership  secured  in  an  exchange  ? 

What  can  you  say  on  the  origin  and  history  of  the 
New  York  Cotton  Exchange  ? 

What  effect  did  the  through  bill  of  lading  have 
on  New  York  Cotton  Exchange  as  a  spot  market? 

To  obviate  delivery  what  rules  did  they  adopt? 

What  can  you  say  of  the  volume  of  business  done 
on  this  exchange? 

When  did  they  cease  publishing  the  record  of  busi- 
ness? Why? 

What  percentage  leads  to  actual  transfer  of  the 
cotton  ? 

Describe  hedging  as  a  protection. 

Describe  hedging  as  a  gamble. 

What  is  "scalping"?     "Bucketing"? 

What  is  a  "washed  sale"  ?    "Wringing  out"  ? 

What  is  a  "raid"?    A  "corner"? 

What  is  the  meaning  of  "short"  and  "long"  ? 

What  is  a  broker?    How  does  he  operate? 

What  is  the  official  position  of  a  man  who  buys 
and  sells  across  the  pit? 


Markets   and  Rural   Economics  93 

LESSON  XIII 

What  is  a  "point"?     A  "margin"? 

What  is  a  "bull"?    A  "bear"?    A  "lamb"? 

What  is  an  "operator"? 

How  are  combinations  formed  to  put  price  up  or 
down? 

What  can  you  say  of  the  fluctuations  in  the  prices 
of  commodities  dealt  in  on  exchanges  and  of  those  not 
quoted  on  exchange  boards  ? 

What  is  the  "commercial  difference"  of  the  New 
Orleans  Exchange  ? 

Why  does  the  commercial  difference  not  make  the 
New  Orleans  Exchange  more  heavily  patronized  than 
the  "fixed  difference"  of  the  New  York  Exchange? 

How  do  heavy  cotton  dealers  and  operators  get 
exclusive  knowledge  of  conditions  and  supplies? 

What  are  the  commissions  of  transactions  on  the 
exchange  ? 

Who  pays  them  directly? 

How  are  the  charges  passed  to  others?  Who 
finally  foots  the  bill? 

What  can  you  say  of  the  estimated  cost  of  the  sys- 
tem? 

Do  exchanges  perform  the  function  of  merchants? 

Are  they  a  means  of  delivering  the  crop  from  the 
producer  to  the  consumer? 

What  are  the  declared  functions  of  an  exchange  ? 

How  is  it  possible  for  one's  gain  not  to  be  an- 
other's loss? 

How  frequently  does  it  happen  thus? 


94  Markets   and   Rural  Economics 


LESSON  XIV 

What  can  you  say  as  to  the  legislation  on  future 
dealing  in  the  States? 

What  attempts  have  been  made  in  the  way  of  na- 
tional legislation? 

Give  some  arguments  for  the  exchanges. 

Give  some  arguments  against  the  exchanges. 

What  would  be  the  probable  result  of  abolition  of 
future  dealing  by  national  legislation? 

What  can  you  say  as  to  the  utility  of  the  local  cot- 
ton market? 

How  is  the  territory  parceled  out  ? 

How  is  competition  driven  out  when  a  competitor 
attempts  to  ubutt  in"? 

What  substitute  have  the  farmers  offered  for  the 
exchanges? 

What  can  you  say  of  the  attempts  at  warehousing 
by  the  farmer? 

Where  is  the  market  for  cotton  created? 

Could  it  just  as  readily  be  fed  by  a  different  chan- 
nel from  the  one^now  in  use,  aTld  more  economically? 


CHAPTER  X 
THE  GRAIN  EXCHANGES 

The  Chicago  Board  of  Trade  consisted  in  1913 
of  1,642  members.  A  seat  was  worth  $2,500. 
This  exchange  has  a  large  building  at  the  head  of 
La  Salle  street.  On  the  main  floor  are  three  grain 
pits — wheat,  corn  and  oats.  The  exchange  per  se 
neither  buys  nor  sells  anything.  It  is  a  place  where 
traders,  who  have  bought  the  privilege  and  subscribed 
to  its  rules,  meet  to  buy  and  sell  grain  and  deal  in 
grain  contracts. 

As  to  how  much  grain  is  bought  and  sold  and  how 
much  is  involved  in  the  contracts  that  are  bought 
and  sold  no  one  knows,  as  it  is  the  deliberate  policy 
of  the  exchanges  not  to  allow  the  public  to  know — 
there  is  a  reason.  Each  transaction  is  an  individual 
and  private  affair,  so-far  as  the  record  is  concerned; 
no  one  knows  at  the  end  of  a  day*'s  transactions  how 
much  anyone  has  traded,  other  than  himself.  When 
changes  are  made  in  price,  the  last  price  is  telegraphed 
at  once  and  becomes  a  quotation.  It  may  last  all  day 
or  it  may  last  five  minutes.  About  150  telegraphers 
are  kept  at  the  keys  all  the  time  answering  the  calls 
of  the  brokers  and  their  customers  and  communicating 
with  them  by  signs  and  messages. 

T^U*  L  11* 

Ihis  exchange  transacts  as  much  business  as  any 
other  five  of  the  largest  grain  exchanges  in  the  world. 
Not  infrequently,  there  are  10,000,000  bushels  of 


96  Markets   and   Rural   Economics 

,  wheat  in  Chicago.  They  buy  and  sell  grain  any- 
where but  usually  that  located  in  the  Chicago  zone. 
The  reason  there  are  more  grain  than  cotton  ex- 
changes is  because  the  parity  of  prices  of  grain  does 
not  maintain  over  as  large  a  territory  as  with  cotton, 
and  spots  and  futures  respond  to  each  other  in  a 
smaller  range  or  markets.  This  is  due  to  the  fact 
that  certain  zones  of  supply  influence  prices  because 
of  freight  rates  and  because  the  centers  of  consump- 
tion differ  materially  from  that  of  the  Southern 
product. 

It  is  those  agencies  that  have  grown  up  in  these 
exchanges  whereby  prices  are  artificially  affected  that 
the  farmer  and  consumer  object  to,  and  toward  which 
they  are  waging  a  warfare  of  extermination  of  the 
future  dealing  features  of  these  exchanges. 

When  asked,  "What  would  be  the  result  of  pro- 
hibiting future  dealing  ?"  the  usual  reply  is,  "It  would 
throw  the  handling  of  grain  into  the  hands  of  a  few 
millionaire  dealers  and  millers."  The  same  plea  is 
made  by  the  cotton  broker.  There  is  no  use  in  dodg- 
ing the  question;  if  the  farmer  is  determined  to  sell 
as  soon  as  he  harvests  his  grain  or  picks  his  cotton, 
it  will  throw  the  crops  into  the  hands  of  speculators, 
just  the  same  after  future  dealings  are  prohibited  as 
it  does  now.  Hedging  is  not  always  a  protection 
against  a  decline  of  spots,  but  it  is  frequently  enough 
protection  to  cause  most  dealers  to  resort  to  it.  Now, 
if  this  hedging  is  prohibited,  there  is  likely  to  be  an 
inclination  to  require  a  wider  margin  between  the 
current  and  future  price  when  the  delivery  is  to  be 
finally  made.  Great  quantities  of  grain  and  cotton 
can  only  be  handled  by  a  great  quantity  of  money, 
when  they  are  actually  bought  and  stored  for  future 
use.  If  it  cannot  be  hedged  banks  are  less  willing 


Markets   and  Rural   Economics  97 

to  loan  within  close  margin  of  market  value.  As  to 
how  much  the  risk  incident  to  fluctuation  would  be 
mitigated  or  augmented  by  a  prohibition  of  future 
dealing  on  margin  is  a  mooted  question. 

THE  CARRYING  FUNCTION 

The  only  safe  business  proposition  for  the  farmer 
is  for  him  to  assume  the  carrying  function,  and  sell 
only  to  mills  as  they  need  his  wheat  or  his  cotton 
throughout  the  year.  This  is  the  doctrine  of  the 
Farmer's  Union,  and  much  effort  has  been  put  forth 
in  this  direction  in  an  endeavor  to  carry  out  this  plan. 

The  cost  of  the  exchanges  must  be  taxed  on  to 
whatever  they  handle  and  passed  on  to  the  consumer. 
In  like  manner  it  is  up  to  the  farmer  himself,  in  as- 
suming the  carrying  function,  to  tack  on  this  carrying 
cost  and  pass  it  on  to  the  consumer.  If  the  farmer 
is  unwilling  to  assume  the  risk  and  expense  of  carry- 
ing his  products  till  the  consuming  world  wants  them, 
why  should  he  object  to  others,  who  do  assume  the 
risk,  making  all  out  of  it  they  can?  It  is  up  to  the 
farmer  to  do  this  himself  or  take  the  consequence  of 
not  doing  so.  All  the  resolutions  he  may  pass,  and 
all  the  impolite  language  he  may  use,  will  not  keep 
the  speculator  from  doing  business  at  the  same  old 
stand.  The  farmer  is  making  a  fool  of  himself  to 
keep  up  this  fight  unless  he  gets  down  to  business  and 
does  for  himself  what  others  have  been  doing  for 
him  and  making  him  foot  the  bill. 

The  farmers  of  this  country  could  destroy  every 
future-dealing  exchange  in  the  world  in  one  year  if 
they  were  a  unit,  and  were  to  try,  without  there  being 
a  single  law  passed,  by  any  State,  by  the  national  gov- 
ernment or  by  any  foreign  nation.  It  could  be  done 
this  way:  Do  the  carrying  and  distributing. 

The  Chicago  Board  of  Trade  voted,  in  June,  1911, 


98  Markets    and   Rural   Economics 

to  change  their  rules  so  that  when  a  corner  is  made 
a  committee  can  say  at  what  price  the  settlement  is  to 
be  made,  and  those  caught  short  will  not  have  to  set- 
tle at  the  inflated  price.     But  it  would  be  very  diffi- 
cult to  comply  with  these  rules  because  of  the  inability 
to  decide  at  just  what  price  the  settlement  should 
be  made.     Besides,  it  spoils  the  game  and  takes  away 
the  incentive  that  keeps  the  excitement  going  on  the 
exchange.     If  the  farmer  would  assume  the  carrying 
function,  and  exchanges  were  supervised  by  govern- 
ment officials  in  the  interest  of  the  people  and  no  fu- 
ture dealings  on  margins  allowed,  it  would  go  far 
toward    economizing    our    commercial    system,    and 
eliminating  useless  waste  and  expense,  as  well  as  pre- 
venting gambling  in  future  contracts,  where  no  deliv- 
ery is  made  or  contemplated.     It  would  place  trading 
on  a  legitimate  spot  basis,  and  give  the  normal  oper- 
ation of  the  law  of  supply  and  demand  full  swing. 
An  exchange  abrogates  the  law  of  recompense.     It 
should  not,  and  would  not,  if  run  as  a  spot  exchange 
under  proper  control,  and  all  sales  reported  and  pub- 
lished, with  date,  amount,  and  parties  in  the  contract. 
The  farmer  has  no  more  competition  in  the  pro- 
ducing business  than  he  ought  to  have  to  supply  the 
demand.     This  part  of  the  problem  has  solved  itself 
without  any  conscious  effort  on  his  part.     What  he 
now  needs  to  do  is  to  eliminate  competition  in  the 
marketing  of  his  crops.     He  can  readily  do  so  by 
patronizing  the  selling  agencies  he  has  established 
in  the  various  States,  and  when  a  mistake  is  made  and 
the  sales  do  not  pan  out  as  expected,  right  the  wrong 
and  stick  to  it  instead  of  flying  off  the  handle  and 
taking  to  the  woods  as  so  many  have  done.     Men 
with  money  and  brains  do  not  cut  such  stunts  as  that 
in  handling  the  things  that  are  consumed  every  hour 


Markets   and  Rural  Economics  99 

of  the  year.  When  the  ship  springs  a  leak  it  should 
be  mended  or  a  new  ship  secured — do  not  jump  over- 
board and  refuse  the  lifeline. 

When  the  farmer  comes  to  his  own  it  will  be  a  great 
day  for  this  country,  for  America,  and  for  the  world. 
When  good  roads  extend  in  every  direction,  when 
he  no  longer  destroys  the  soil,  but  conserves  it;  when  , 
he  has  the  conveniences  that  city  life  affords,  without 
the  disadvantages  that  the  city  must  of  necessity  have; 
when  he  can  dash  in  his  auto  to  town  and  back  in 
an  hour,  or  to  the  city,  fifty  miles  away,  and  return 
in  half  a  day;  when  he  can  read  his  daily  papers  and 
talk  across  the  continent  before  breakfast;  when  he 
has  access  to  fine  schools;  when  he  draws  the  whip 
of  the  lightning  across  the  back  of  glittering  steel  and 
turns  the  stubborn  glebe;  when  he  shall  own  his  home; 
when  he  shall  be  master  of  science  of  marketing; 
when  he  shall  plow  with  the  legislative  plow  with 
the  same  facility  that  he  does  the  steel  plow — then 
will  the  farmer  come  to  his  own. 

LESSON  XV 

What  is  a  Board  of  Trade?     Bourse? 

What  is  the  largest  grain  exchange  in  the  world? 

What  can  you  say  as  to  its  origin  and  development? 

Wherein  do  the  rules  of  the  grain  exchanges  differ 
fundamentally  from  the  rules  of  the  cotton  exchanges? 

Give  the  details  of  the  operation  of  a  grain  ex- 
change. 

How  much  grain  is  handled  by  the  exchanges? 
How  much  pure  speculation  ? 

Give  arguments  for  grain  exchanges. 

Give  arguments  against  grain  exchanges. 


ioo  Markets    and   Rural   Economics 

What  are  the  declared  functions  of  a  grain  ex- 
change ? 

LESSON  XVI 

What  proportion  of  the  staple  crops  must  be  car- 
ried from  a  few  weeks  to  a  year? 

Who  performs  this  function  in  the  main  at  pres- 
ent? 

What  means  do  they  adopt  to  enable  them  to  carry 
with  safety? 

Why  do  neither  the  producer  nor  the  consumer 
carry  this  surplus  ? 

Is  there  a  better  way? 

If  a  change  is  made,  who  will  have  to  assume  the 
task? 

How  could  a  change  of  system  be  made  without 
any  legislation? 

What  can  you  say  of  valorizing? 

Has  either  the  producer  or  consumer  any  excuse 
for  complaining  of  speculation,  unless  he  is  willing 
to  assume  the  carrying  function,  which  he  now  dele- 
gates to  the  speculator? 

What  are  the  difficulties  in  the  way  of  shifting  the 
responsibility? 

Who  finances  those  who  hold  at  present? 

Who  will  have  to  finance  if  the  producer  undertakes 
the  task? 

Who  will  dictate  who  is  to  sell'first? 

How  can  the  farmer  perform  the  task? 


XI 

STOCK  EXCHANGES 

A  stock  exchange  is  a  place  where  stocks,  bonds, 
and  other  securities  are  bought  and  sold.  Paris, 
Berlin,  London  and  New  York  have  the  world's 
greatest  exchanges.  In  Paris  the  business  can  be 
traced  back  for  about  five  hundred  years,  but  it  was 
not  until  1726  that  the  Bourse  was  legally  recog- 
nized. Previous  to  1773  the  London  stockbrokers 
conducted  their  business  in  and  about  the  Royal  Ex- 
change, but  in  that  year  they  formed  themselves  into 
a  separate  organization  under  the  designation  of 
Stock  Exchange.  Settlements  on  the  Bourse  are  made 
monthly  and  semi-monthly.  The  Bourse  is  under  gov- 
ernment control  and  any  one  may  act  as  broker. 
The  settlement  occupies  three  days  and  is  monthly. 
The  first  organization  of  brokers  in  New  York  dates 
from  about  1820.  It  was  not  till  1871  that  a  per- 
manent organization  was  formed,  when  two  dozen 
brokers  banded  together  and  fixed  a  uniform  com- 
mission of  one-fourth  of  one  per  cent.,  since  then  re- 
duced to  one-eighth  of  one  per  cent.  The  New  York 
Stock  Exchange  elect  their  own  members  and  had 
in  1913  eleven  hundred.  The  hours  are  from 
ten  to  three.  The  mode  of  conducting  business  in 
Wall  Street  differs  in  some  respects  from  both  Eng- 
lish and  Continental  procedure.  Transactions  of  one 


IO2  Markets    and   Rural  Economics 

day  are  settled  the  next.  The  curb  exchange  is  one 
held  in  the  street.  The  business  transacted  is  in- 
significant as  compared  to  the  other  exchanges. 

Stock  exchanges  are  distinguished  from  cotton  and 
grain  exchanges  in  the  character  of  securities  or  com- 
modities bought  and  sold.  The  value  of  shares  in 
the  great  corporations  of  the  country  is  affected  by 
the  stock  exchanges,  and  only  incidentally  and  indi- 
rectly do  they  affect  the  price  of  the  common  neces- 
sities of  life.  The  volume  of  business  of  the  ex- 
changes is  in  excess  of  any  other  kind  of  trading. 
The  facilities  which  they  offer  for  heavy  trading 
makes  exchange  dealing  a  favorite  form  of  commer- 
cial exchange. 

The  principal  securities  handled  on  the  stock  ex- 
changes are :  railroads,  industrials,  public  utilities, 
and  kindred  securities.  They  are  not  limited  t6 
American  securities,  but  the  trade  is  international. 
Thev  do  not  publish  the  volume  of  business  trans- 
acted. 

The  condition  of  the  stock  market  is  taken  as  a 
criterion  as  indicating  the  general  prosperitv  of  the 
country.  The  business  world  is  very  materially  af- 
fected by  the  fluctuations  of  the  stock  market.  The 
great  bulk  of  the  corporate  wealth  of  the  country 
is  represented  in  the  stocks  dealt  in  on  the  exchanges. 

Corporations,  except  national  banks,  are  not  the 
creatures  of  Federal  enactment,  but  of  State  charters. 
This  gives  rise  to  quite  a  diversity  of  corporation  laws 
and  regulations.  No  State  limits  the  amount  of  cap- 
ital stock  for  which  a  corporation  may  be  chartered. 
This  means  that  there  is  no  limit  to  the  amount  of 
stock  that  can  be  issued  by  a  corporation  whether 
there  is  one  cent  of  tangible  assets  to  back  the  stocks 
so  issued  or  not. 


Markets   and  Rural   Economics  103 

If  the  required  number  of  men,  usually  five,  are  a 
mind  to  pay  the  charter  fees  and  taxes  they  can  or- 
ganize a  company,  have  it  chartered,  issue  to  them- 
selves all  the  stock  they  care  to,  sell  the  remainder 
to  the  investing  public  and  operate  on  the  money 
thus  secured  and  pay  themselves  salaries  for  con- 
ducting the  business,  and,  if  the  dividends  are  made, 
they  draw  dividends  on  their  "watered"  stocks  the 
same  as  those  stockholders  who  paid  cash  for  their 
shares. 

The  fact  that  the  value  of  shares  in  a  company 
or  corporation  is  not  determined  by  the  amount  of 
real,  tangible  assets  behind  them,  but  is  determined 
almost  solely  by  the  earning  power  of  the  shares, 
based  on  the  cost  of  said  shares,  has  tended  to  lend 
a  respectability  to  this  species  of  stock  jobbing  that 
otherwise  would  not  adhere.  The  fact  that  some 
corporations  with  very  meagre  assets  have  enormous 
earning  power  has  helped  to  intensify  the  speculative 
mania.  The  stock  exchange  offers  the  visual  point  of 
manifestation  and  greatly  augments  the  possibilities 
of  speculation.  It  also  offers  a  ready  market  for 
trading  in  the  best  and  the  worst  of  the  larger  se- 
curities of  almost  every  variety  of  shares. 

New  companies  whose  stocks  are  of  doubtful  value 
are  shy  of  having  their  stocks  quoted  on  exchange. 
A  company  starts  out  by  having  an  arbitrary  price 
at  which  its  stocks  are  sold.  If  they  are  quoted  on 
an  exchange  at  a  lower  price  this  would  prevent  the 
stock  solicitors  from  being  able  to  market  shares 
for  more  than  they  were  quoted  on  the  exchange. 
The  fact  that  stocks  are  quoted  on  an  exchange 
does  not  necessarily  mean  that  they  are  being  sold. 
So  a  firm  may  have  stocks  of  a  rival  quoted  on  the 
exchange  at  under  value  for  the  purpose  of  bringing 


IO4  Markets    and   Rural   Economics 

it  into  disrepute  and  preventing  the  investing  public 
from  purchasing  its  stock.  Be  it  remembered  that 
one  does  not  have  to  own  stock  to  offer  it  for  sale 
on  an  exchange.  If  a  buyer  is  found  it  is  easy  to 
say  that  none  are  available  just  then.  In  order  to 
prevent  this  unfair  practice  it  is  now  provided  that 
the  stockholders  of  a  company  may  escrow  their 
stock:  i.  e.,  sign  an  agreement  that  the  stock  is  not 
for  sale  at  all  until  a  certain  date.  When  this  is  done 
it  is  unlawful  for  the  stock  to  be  quoted  on  an  ex- 
change— the  ones  so  doing  are  subject  to  prosecu- 
tion. 

Firms  rent  private  wires  from  the  exchange  to 
various  parts  of  the  country  so  as  to  keep  in  constant 
touch  with  the  local  as  well  as  the  exchange  markets 
and  with  customers.  Heavy  dealers  in  grain  and 
cotton  practice  this  periodically  even  more  than  do 
stock  dealers. 

The  different  exchanges  are  in  constant  communi- 
cation with  others  of  like  nature. 

A  member  of  the  Stock  Exchange  will  fit  up  an 
office  for  customers  who  wish  to  take  advantage  of 
the  privilege  of  trading  close  to  the  "ticker."  Some 
traders  prefer  to  follow  the  market  through  frequent 
telegraph  or  telephone  advices.  The  mailing  depart- 
ment issues  daily  market  letters,  placing  before  cus- 
tomers the  status  of  the  market.  A  statistical  depart- 
ment furnishes  detailed  information  and  once  a  week 
a  financial  indicator  is  issued  which  shows  fluctua- 
tions in  prices,  dividends,  rates,  etc.  Out-of-town 
customers,  who  wish  to  scalp  fractional  or  one-point 
profits,  trade  through  a  uwire  house."  Private  cipher 
codes  are  provided,  which  insure  privacy  and 
minimize  expense  when  telegraphing  orders.  Orders 
may  be  sent  by  any  means  of  communication. 


Markets   and  Rural   Economics  105 

When  you  buy  or  sell  for  cash  in  full  the  certificate 
is  recorded  in  your  name  and  delivered  by  messenger 
or  registered  mail. 

When  you  buy  on  margin  your  broker  pays  in  full 
for  the  stocks,  holds  the  stock  as  security,  and  re- 
ceives from  you  a  cash  payment  or  "margin"  suffi- 
cient to  protect  him  from  loss  through  possible  depre- 
ciation in  the  market  value  of  the  stock.  He  takes 
the  stocks  to  a  bank,  hypothecates  them  and  borrows 
on  call  the  amount  of  the  stocks  not  covered  by  mar- 
gin. A  rise  of  five  points  means  a  profit  of  $50  (less 
charges)  on  ten  shares  of  stock,  and  multiplies  ac- 
cordingly. The  minimum  of  protection  required 
varies.  It  is  usually  ten  points  on  active  stocks,  of 
low  or  medium  price;  that  is,  for  a  deposit  of  $100 
your  broker  will  buy  and  carry  for  you  ten  shares; 
for  $200  he  will  carry  twenty  shares.  The  require- 
ment on  high-priced  stocks  is  fifteen  to  twenty  points 
or  $150  to  $200  for  ten  shares. 

The  required  margin  must  be  kept;  additional 
margins  are  seldom  called  for  while  six  points  pro- 
tection remains.  "Stop  loss"  orders  may  be  entered 
two  points  or  more  from  the  price  where  the  margin 
is  exhausted.  A  stop  loss  order  is  an  order  to  sell 
at  the  market  if  a  certain  loss  is  reached  on  a  decline. 
Stocks  may  be  bought  on  a  margin,  and  paid  for  in 
partial  payments,  by,  at  any  time,  settlement  of  bal- 
ance due. 

In  sending  orders  you  state  whether  you  wish  to 
buy  for  cash,  on  margin,  or  on  the  partial  payment 
plan;  what  number  of  shares  you  want,  the  name  of 
the  stock,  and  the  price  you  will  pay,  or  whether 
"at  the  market." 

A  "scalper"  is  one  who  buys  in  and  sells  out  the 
same  day,  or  sells  in  and  buys  out  the  same  day. 


io6  Markets    and  Rural  Economics 

Selling  stock  you  do  not  own,  prices  rise  and  you 
cannot  withdraw  without  loss  is  called  "short  selling." 

To  be  "caught  long"  is  to  be  overloaded  and  find 
no  sales  without  loss. 

Short  sales  are  made  with  the  intention  of  buying 
back  at  a  lower  price  and  making  a  profit  of  the  differ- 
ence. When  an  order  is  given  a  broker  for  short 
sales,  the  broker  "borrows"  the  stock  for  delivery. 
When  a  customer  gives  an  order  for  the  short  sale 
of  any  stock,  he  deposits  with  his  broker  a  margin. 
The  usual  requirement  is  $10  a  share.  This  means 
that  the  stock  can  rise  10  points  before  the  margin 
is  entirely  wiped  out.  The  broker  borrows  the  stock 
for  delivery.  The  lender  can  "call"  the  broker  for 
a  margin,  and  it  is  the  usual  practice  among  brokers 
to  call  this  margin  to  the  market.  It  is  the  practice 
of  New  York  Stock  Exchange  houses  to  lend  stock 
which  they  are  carrying  on  margin  for  their  cus- 
tomers. The  rules  of  the  exchange  allow  this,  and 
under  the  agreement  they  make  with  their  customers 
to  be  allowed  to  hypothecate  the  securities.  So  the 
stock  is  borrowed  "against"  the  sale  and  when  the 
seller  has  "covered" — i.  e.,  bought  a  stock  of  which 
he  is  short — the  stock  is  returned  to  the  lender. 

The  expenses  of  exchange  transactions  are  met  by 
commissions  charged  by  brokers.  Commission  charges 
are  one-eighth  of  one  per  cent,  of  the  par  value  for 
buying,  and  the  same  for  selling,  or  $1.25  each  way 
on  10  shares,  and  for  other  quantities  in  proportion,1 
with  a  minimum  charge  of  $1.25  per  transaction. 

Interest  is  charged  on  money  advanced  for  the  pur- 
chase of  stock  on  margin,  on  the  difference  between 
cost  and  margin,  which  varies  from  4%  to  6%. 

Long  stock  carried  on  margin,  on  the  day  that  the 


Markets   and  Rural  Economics  107 

company's  books  closed  for  a  dividend,  pay  dividends 
for  time  carried  by  purchaser.  One  may  sell  his 
stock,  on  which  he  is  entitled  to  a  dividend,  at  any 
time  after  it  sells  "ex-dividend,"  and  still  receive  the 
dividend  when  payable. 

On  the  partial  payment  plan  $10  a  share,  regard- 
less of  the  par  value,  is  the  smallest  initial  deposit 
accepted;  no  stock  selling  under  $10  a  share  can  be 
purchased  on  the  partial  payment  plan.  The  balance 
is  paid  monthly  in  amounts  equal  to  $5  a  share  on  all 
stocks  bought  at  a  price  above  30,  and  $3  a  share  on 
all  stocks  bought  below  30.  Bonds  have  similar  re- 
quirements. Payments  on  a  hundred  dollar  bond 
would  be  $5  a  month  and  other  multiples  accordingly. 
At  any  time  total  payment  may  be  made,  and  the 
stock  certificate  will  be  issued  to  purchaser.  Securi- 
ties may  be  sold  at  any  time,  and  the  seller  receive 
his  aggregate  deposits  plus  the  profit,  if  any,  less 
the  charges.  Holdings  may  be  increased  without  ad- 
ditional deposit  whenever  payments  on  the  first  pur- 
chase aggregate  the  stated  requirements  on  both  pur- 
chases, and  provided  the  security  first  purchased  is 
not  at  the  time  selling  below  its  purchase  price.  In 
the  event  of  failure  to  pay  an  instalment  when  due, 
the  securities  are  considered  as  carried  on  margin, 
subject  to  rules  governing  margin  accounts.  Thus,  a 
stop  loss  order  will  be  entered  close  to  the  point  of 
exhaustion  of  margin.  This  is  the  usual  rule  unless 
otherwise  ordered.  If  the  customer  prefers  he  may 
receive  in  return  his  deposits,  plus  the  accumulated 
profits,  or  less  the  accrued  losses,  and  less  the  charges 
in  either  case. 

The  interlocking  of  directorates,  resulting  in  inside 
management,  and  the  practice  of  companies  buying 
and  selling  their  o^n  stocks  on  the  exchange,  has 


loS  Markets    and   Rural   Economics 

led  to  the  officers,  directors,  or  stockholders  of  a 
company  artificially  "bulling"  the  market  or  artificial- 
ly "bearing"  the  market,  and  thereby  swindling  the 
investing  public. 

Sometimes  flurries  in  the  stock  market  will  start 
tremors  in  business  that  are  felt  throughout  the  civil- 
ized world.  "Black  Friday"  may  be  mentioned  as 
an  instance  in  the  early  days  of  American  stock  job- 
bing. Jay  Gould  was  counted  "king  of  the  stock 
market"  in  his  palmy  days.  Tom  Lawson,  in  his 
"Frenzied  Finance,"  acquaints  us  with  the  big  stock 
operators  of  recent  years.  We  all  remember  Brown 
and  Sully  in  the  cotton  market,  and  Patten  on  the 
wheat  pit,  as  masters  in  their  line. 

C.  W.  Smith  of  England  said :  "It  is  by  such  deadly 
'Bull  and  Bear'  international  gambling  weapons  that 
these  men  have  also  cunningly  and  secretly  obtained 
the  key  to  the  financial,  agricultural,  and  commercial 
conquest  of  the  world.  I  maintain  I  have  ample  jus- 
tification in  denouncing  international  financial  and 
commercial  gambling  in  'options  and  futures'  as  stand- 
ing out  as  the  greatest  of  all  perils  which  the  world 
has  to  contend  with  in  the  future  in  the  connection 
with  preserving  the  rights  of  the  property,  as  well  as 
upholding  the  liberty  and  privileges  of  the  people." 

Mr.  Coats,  of  Manchester,  England,  President  of 
the  Cooperative  Manufacturers'  Association,  repre- 
senting 6,000,000  spindles,  said,  in  an  address  before 
the  convention  of  the  International  Spinners  and  the 
cotton  producers  of  the  United  States,  in  Atlanta,  Ga., 
October  7-9,  1907  :  "Ninety  per  cent,  of  the  business 
of  the  cotton  exchange  is  evil,  and  unless  the  evil  can 
be  eliminated  and  the  good  retained,  it  had  better  be 
abolished." 

Congressman  W.  P.  Hepburn,  of  Iowa,  said  "It  is 


Markets   and  Rural   Economics  109 

not  at  all  probable  that  business  men  would  pay 
$75,000  or  $100,000  for  a  seat  on  the  New  York 
Stock  Exchange  if  there  was  not  a  prospect  of  great 
returns.  Would  dozens  of  brokers,  who  own  these 
priceless  seats,  maintain  thousands  of  miles  of  private 
wires,  at  a  cost  of  thousands  of  dollars  per  month, 
if  there  was  not  the  sure-thing  gamblers'  profit  in 
sight  ?  Would  they  buy  these  seats  of  gold,  and  wires 
of  unknown  cost,  if  they  were  only  buying  and  selling 
stocks  in  a  legitimate  manner?  All  the  race-track 
gambling  in  the  world;  all  the  games  of  cards  in  the 
'Tenderloins'  and  'red  light  districts'  of  the  cities; 
all  the  games  of  chance  at  Monte  Carlo  and  the  other 
famous  gambling  resorts  of  the  world  are  as  drops 
in  the  bucket  compared  with  the  enormous  transac- 
tions of  the  stock  exchanges  of  the  United  States." 

The  Saturday  Evening  Post,  in  a  recent  editorial, 
said:  uFirst  and  last,  a  lot  of  money  is  made  out 
of  this  gambling.  Otherwise  it  would  not  continue. 
Whether  the  bull  finally  gets  his  money,  or  the  bear, 
or  simply  the  broker,  does  not  matter.  Whoever  gets 
it  does  not  earn  a  penny  of  it.  He  does  not  produce 
or  transport  or  distribute  a  bushel  of  grain  or  a  pound 
of  cotton.  He  contributes  absolutely  nothing  to  in- 
dustry itself.  He  merely  sits  aside  and  bets  on  it. 
So  that  the  money  that  is  made  is  speculation,  what- 
ever the  amount  and  whoever  receives  it,  is  just  so 
much  scooped  out  of  the  wealth  that  the  country  pro- 
duces, with  no  return  on  the  scooper's  part." 

William  Jennings  Bryan  said,  in  a  speech  in  New 
York,  in  March,  1908:  "Measured  by  the  number 
of  suicides  caused  by  the  New  York  Exchanges, 
Monte  Carlo  is  an  innocent  pleasure  resort  by  com- 
parison, and  the  men  who  operated  the  Louisiana 
Lottery  never  did  a  tithe  of  harm  that  grain  gamblers, 


no  Markets   and  Rural  Economics 

gagged,  for  the  going-through  of  their  clothes,  with 
the  profits  limited  only  by  the  amount  of  money  their 
victims  had  about  their  person.  The  legitimate  busi- 
ness transacted  by  the  Stock  Exchanges  is  infinitesimal 
compared  with  its  gambling  business.  It  is  the  most 
gigantic  sneak-thief-bully-ragger  civilization  has  ever 
known.  High  cost  of  living  is  caused  by  the  Stock 
Exchange  trick.  If  high-cost  living  continues  it  will 
bring  to  the  American  people  black,  brutal  revolu- 
tion." 

Mr.  Lawson  estimates  the  eleven  hundred  seats  on 
the  New  York  Exchange  at  a  hundred  million  dol- 
lars; the  amount  invested  in  the  exchange  business 
throughout  the  country  at  a  billion  dollars;  the  com- 
missions at  seventy  odd  million  dollars;  the  amount 
borrowed  on  these  securities  at  two  billion  dollars; 
the  interest  charged  to  customers,  on  money  bor- 
rowed on  stocks  in  excess  of  the  margins  at  a  hundred 
million;  average  number  of  shares  sold  195,000,000, 
involving  a  turnover  of  $15,500,000,000,  and  of 
bonds  $800,000,000. 

It  is  evident  that  whatever  amount  is  needed  to 
pay  off  the  remainder  of  the  expense  account  not 
covered  by  commissions,  and  leave  a  margin  of  profit, 
is  made  by  the  manipulation  of  the  prices  of  the  securi- 
ties bought  and  sold  on  the  exchanges. 

LESSON  XVII 

What  is  a  stock  exchange? 
Where  are  the  larger  ones  located? 
Point  out  essential  differences  in  their  systems  of 
doing  business. 

What  is  the  function  of  a  stock  exchange? 
What  is  a  "curb"? 


Markets    and  Rural   Economics  in 

How  are  stock  exchanges  distinguished  from  other 
exchanges  ? 

What  markets  are  affected  by  stock  exchanges  ? 

What  can  you  say  as  to  the  volume  of  business 
transacted  on  the  stock  exchanges? 

What  is  "watered"  stock? 

What  is  meant  by  "escrowing"  stock? 

What  is  its  purpose? 

How  are  stock  companies  promoted? 

What  is  a  "wire"  house? 

What  is  a  "scalper"? 

Are  all  deals  on  the  exchange  cash? 

When  you  buy  for  cash  what  is  the  method  of 
procedure? 

When  you  buy  on  partial  payment  plan  what  is  the 
method  of  procedure  ? 

Can  you  deal  in  futures  on  margin  on  the  stock 
exchange  ? 

Can  you  sell  what  you  have  not  and  do  not  expect 
to  have  on  the  stock  exchange? 

What  is  "short"  selling? 

What  is  "long"  selling? 

What  is  a  "stop  loss"  order? 

How  do  you  proceed  in  such  deals  ? 

Who  pays  the  expense  of  exchanges  ? 

What  are  the  commissions? 

When  is  interest  charged,  and  why? 

Can  you  get  dividends  before  complete  payment  of 
stock  is  made? 

What  is  a  "margin  call"? 

Name  some  of  the  kings  of  the  stock  market. 

What  have  some  noted  statesmen,  publicists,  and 
captains  of  industry  had  to  say  about  exchanges? 


CHAPTER  XII 

COOPERATIVE  MARKETING  BY  FARMERS 

There  are  various  methods  and  degrees  of  co- 
operation. It  might  be  well  for  us  to  get  a  clear 
conception  of  these  before  entering  into  a  discussion 
of  the  various  methods  used  in  different  parts  of  the 
^world. 

T    There  are  three  primary  distinctions  in  ways  of 
j  marketing:   the    individualistic   way;   the   capitalistic 
/  way,  for  the  benefit  of  the  stockholders;  and  the  co- 
!    operative  way,  for  the  benefit  of  the  stockholders  and 
patrons.     It  is  the  last  we  now  have  under  consider- 
ation.    Dividing  profits  according  to  patronage  was 
developed  by  the  Rochdale  cooperators  in  England, 
and  in  some  form  is  the  basis  of  all  genuinely  co- 
operative enterprises  the  world  over.     It  begins  by 
giving  a  stated  rate  of  interest  to  the  stockholder, 
then  an  allowance  for  expenses  and  sinking  fund,  and 
patrons  come  in  for  the  remainder  of  gain  in  the 
business. 

To  divide  profits  to  stockholders  is  the  attractive 
way  of  organizing  corporations.  This  kind  of  co- 
operation is  for  shareholders  only.  There  is  the 
other  extreme  of  dividing  profits  among  all  patrons 
whether  stockholders  or  members  of  the  Association 
or  not.  There  is  the  medium  ground  of  allowing 
the  non-members  dividends  at  half  the  rate  the  mem- 
bers receive  and  to  apply  these  upon  shares  of  stock 


Markets   and  Rural  Economics  113 

cotton  gamblers,  and  stock  gamblers  of  New  York  do 
every  day." 

January  the  I2th,  1912,  Mr.  Andrew  Carnegie 
was  testifying  before  the  special  committee  of  Con- 
gress, investigating  the  United  States  Steel  Corpora- 
tion, and  from  the  official  record  we  quote  the  fol- 
lowing : 

The  Chairman.  I  understand.  Your 
shares  were  in  blocks  of  a  thousand  dollars 
apiece? 

Mr.  Reed.  That  was  the  Carnegie  Co., 
of  New  Jersey. 

Mr.  Carnegie.  I  made  them  as  thousand- 
dollar  shares  so  as  not  to  render  them  gam- 
bling instruments  in  the  stock  exchange. 

The  Chairman.  I  see.  You  put  them 
at  a  thousand  dollars  apiece  to  keep  them 
out  of  the  stock  exchange? 

Mr.  Carnegie.     As  far  as  I  could. 

The  Chairman.  Why  did  you  want  to 
keep  them  out  of  the  stock  exchange? 

Mr.  Carnegie.  Because  I  did  not  want 
to  have  partners  that  would  be  tempted  to 
go  into  speculation.  I  never  bought  a  share 
in  my  life  in  a  stock  exchange.  I  never  sold 
a  share.  I  have  been,  you  might  say,  a 
monomaniac  on  the  subject  of  speculation. 
I  have  never  touched  it.  I  have  never 
bought  a  share  of  stock  long  nor  sold  it 
short  in  my  life. 

The  Chairman.  Before  the  Ways  and 
Means  Committee  I  find  this  statement 
right  in  line  with  what  you  said : 

"I  want  to  say  that  I  am  no  stock  gam- 


H4  Markets    and   Rural   Economics 

bier,  and  I  never  in  my  life  associated  with 
stock  gamblers.  *  *  I  think  that  the 
common  stock  gambler  is  one  of  the  worst 
citizens  that  a  country  can  have.  They  are 
parasites,  feeding  upon  values  and  creat- 
ing none." 

Mr.  Carnegie.  Can  you  say  a  better 
thing  than  that?  (Laughter)  They  are 
parasites,  feeding  on  values  and  creating 
none. 

You  said  something  I  had  said  should  be 
put  in  marble.  I  think  that  would  be  a 
splendid  thing  to  have  in  the  New  York 
Stock  Exchange,  in  marble.  (Laughter.) 

The  Chairman.  I  say  amen  to  every 
word  of  that. 

Mr.  Carnegie.    Thank  you,  sir. 

"Legitimate  purchases  of  commodities  and  of 
stocks  and  securities  for  investment  have  no  connec- 
tion whatever  with  purchases  of  stocks  or  other  secur- 
ities or  commodities  on  a  margin  for  speculative  or 
gambling  purposes.  There  is  no  moral  difference  be- 
tween gambling  at  cards,  or  in  lotteries,  or  on  the 
race  track,  and  gambling  in  the  stock  market.  One 
method  is  just  as  pernicious  to  the  body  politic  as  the 
other  in  kind,  and  in  degree  the  evil  wrorked  is  far 
greater. 

"It  would  seem  that  the  Federal  Government 
could  at  least  act  by  forbidding  the  use  of  the  mails, 
telegraph  and  telephone  wires  for  mere  gambling  in 
stocks  and  futures,  just  as  it  does  in  lottery  transac- 
tions. 

"The   apologists   of  successful   dishonesty  always 


Markets    and  Rural  Economics  115 

disclaim  against  any  effort  to  punish  it,  on  the  ground 
that  any  such  effort  will  'unsettle  business/ 

"The  keynote  of  all  these  attacks  upon  the  effort 
to  secure  honesty  in  business  and  in  politics  is  well 
expressed  in  brazen  protests  against  any  effort  for 
the  moral  regeneration  of  the  business  world,  on  the 
ground  that  is  unnatural,  unwarranted  and  injurious, 
and  that  business  panic  is  the  necessary  penalty  for 
such  effort  to  secure  business  honesty.  The  morality 
of  such  a  plea  is  precisely  as  great  as  if  made  on  be- 
half of  the  men  caught  in  a  gambling  establishment 
when  the  gambling  establishment  is  raided  by  the 
police. " — President  Roosevelt's  message  to  Con- 
gress, January  31,  1908. 

Thomas  W.  Lawson  says:  "I  began  to  play  the 
game  at  twelve.  I  am  now  fifty-five,  and  I  have 
tagged-arid-tilted  chair  at  the  game's  center  table — 
that  is,  I  have  played  forty-three  calendar  years.  I 
have  bought  and  sold,  traded  in  and  traded  out,  every 
prominent  stock  in  all  the  American  exchanges,  Lon- 
don, Berlin  and  Paris,  and  in  1000  ($100,000),  10,- 
ooo  ($1,000,000),  and  <jo,ooo  ($5,000,000)  share 
lots.  I  have  organized,  capitalized,  and  consolidated 
corporations,  and  have  financed  and  managed  new 
ones.  I  have  not  in  the  past  thirty-five  years  been 
off  the  boards  of  corporations.  In  forty-three 
years'  active  playing  of  the  stock  game,  it  has  brought 
me  an  average  profit  of  more  than  a  million  a  year, 
so  I  have  no  grudge  against  it.  That  is  why  I  have 
the  nerve  to  say,  unqualifiedly,  that  Stock  Exchange 
gambling  is  the  hell  of  it  all.  As  a  practical  working 
device  the  purchaser  of  stocks  on  margin  is  as  per- 
fectly in  the  system's  hands  as  if  they  had  that  section 
of  the  American  people  who  buy  and  sell  stocks  (and 
they  number  millions)  bound  hand  and  foot  and 


n6  Markets    and  Rural  Economics 

in  the  company.  This  method  has  the  advantage  of 
drawing  patronage  from  non-members  and  makes  a 
distinction  between  those  who  take  a  risk  in  invest- 
ment and  those  who  will  not  help  start  the  enterprise 
by  investing  cash  in  it.  Assuming  that  the  responsi- 
bility necessary  to  make  a  business  a  possibility  de- 
serves no  consideration  is  the  grossest  of  selfishness. 
Assuming  that  the  patronage  necessary  to  make  a 
business  a  success  deserves  no  consideration  springs 
from  the  same  sordid  selfishness.  The  half-dividend 
plan  brings  the  non-members  into  the  organization 
where  they  belong,  and  keeps  the  money  in  the  busi- 
ness till  the  shares  are  paid.  The  man  who  shares 
the  risk  of  loss,  which  is  not  imaginary  if  the  enter- 
prise fails,  should  also  stand  to  gain  if  it  succeeds, 
and  to  a  greater  degree  than  he  who  stands  aloof, 
refusing  to  make  it  possible. 

The  point  is  that  the  non-members  cannot  ask  to 
be  put  on  exactly  the  same  footing  with  the  members 
who  have  borne  the  brunt  of  battle  and  assumed  all 
the  financial  risk  in  starting  the  enterprise. 

The  application  of  the  patronage  dividend  in  co- 
operative selling  of  live  stock  is  adjusted  on  a  different 
basis  as  there  is  no  need  of  an  expensive  company  to 
operate  it.  The  cattle  are  marked  with  the  shipper's 
individual  number,  who  gets  in  return  just  what  his 
own  cattle  actually  bring,  less  the  actual  expenses,  in- 
cluding insurance. 

In  operating  cooperative  creameries  the  patrons 
are  credited  with  so  much  cream  at  so  much  test, 
making  so  much  butter-fat  each;  the  butter  is  sold, 
running  expenses  deducted,  a  percentage  (usually 
i%)  is  taken  for  payment  for  the  plant,  making 
improvements,  paying  interest  on  capital  stock  and 
providing  a  reserve;  then  the  remainder  is  paid  to 


Markets   and  Rural  Economics  117 

the  patrons  each  month,  according  to  the  number  of 
pounds  of  butter-fat  supplied. 

In  selling  fruit  cooperatively  the  usual  plan  is  to 
pool  all  the  fruit  of  a  given  day's  shipment,  after 
assigning  it  to  proper  grades,  and  divide  the  receipts 
for  the  receipts  of  each  grade  and  shipment  in  pro- 
portion to  the  amount  supplied  by  each  grower.  The 
percentage  is  held  out  for  expenses,  etc.,  and,  at  the 
close  of  the  season,  if  a  surplus  is  left  it  is  divided 
according  to  patronage. 

In  handling  grain,  some  cooperative  elevators  di- 
vide according  to  bushels  of  grain  brought  to  it; 
others  divide  in  proportion  to  the  number  of  dollars' 
worth  of  business  the  patron  does  with  the  company. 
Many  of  these  elevator  companies  handle  coal,  flour, 
fertilizer,  feed,  tile,  lumber,  vehicles,  machinery,  etc. 
Profits  accruing  from  this  part  of  the  business  are 
usually  kept  separate  and  divided  among  the  cus- 
tomers in  the  supply  department. 

The  same  principle  applies  in  operating  warehouses 
in  the  South  and  \Vest.  All  of  these  are  true  appli- 
cations of  the  principle  of  patronage-dividend  to  dif- 
ferent forms  of  cooperation  in  business,  following 
the  line  of  equity  and  carrying  the  golden  rule  into 
commerce. 

EUROPEAN  METHODS 

Taking  Denmark  as  a  typical  example  of  the  power 
and  effect  of  cpoperation-in  buying,  selling,  financing, 
and  of  mutuality  of  the  government  and  the  citizen, 
the  following  is  given  without  going  into  details  of 
cooperative  methods  in  each  European  nation. 

It  is  a  case  of  the  old,  old  story  of  necessity  being 
the  mother  of  invention.  The  Danes  were  desperate, 
and  willing  to  do  anything  to  relieve  themselves  from 
a  dreadful  condition,  and  the  government  was  willing 


n8  Markets    and   Rural  Economics 

to  help,  being  driven  by  every  pressure  of  national 
need.  The  feudal  system  of  land  tenures  held  through 
the  mediaeval  age,  and  up  to  1 848 — when  it  was  made 
possible  for  a  Dane  to  own  land  in  fee  simple.  When 
the  Napoleonic  wars  were  over,  early  in  the  Nine- 
teenth Century,  the  Danes  were  reduced  to  the  verge 
of  starvation.  Their  shipping  was  destroyed  and 
their  commerce  ruined.  They  had  lost  Sweden,  and 
in  1863  lost  Schleswig  Holstein  to  Prussia.  The 
eastern  side  of  Jutland,  and  the  Danish  islands  in 
the  Baltic,  were  for  a  long  time  almost  the  only  por- 
tion of  Denmark  fit  for  cultivation.  It  was  plain  to 
the  average  Danish  farmer  that,  with  impoverished 
soil,  no  capital  and  no  credit,  he  could  not  compete 
with  the  large  landowners  who  were  beginning  to 
sell  great  quantities  of  dairy  and  meat  products  to 
England  and  Germany.  The  tendency  was  to  the 
constant  increase  of  small  farmers.  The  govern- 
ment being  dependent  upon  the  farmers  did  every- 
thing in  its  power  to  increase  the  number  of  independ- 
ent small  farmers,  and  to  this  end  it  made  money  as 
cheap  as  possible  for  the  farmers,  by  controlling  a 
series  of  banks  managed  for  the  people  and  not  for 
gain.  But  the  small  farmer  was  not  a  factor  as  an 
individual.  To  enter  foreign  markets  and  hold  their 
own,  the  farmers  must  act  in  concert,  definitely,  and 
decisively.  They  must  have  capital,  they  must  regu- 
late the  quantity  and  quality  the  year  round.  To 
standardize  any  product,  one  must  have  sufficient 
quantity  and  the  power  to  control  and  regulate  it  to 
the  market.  The  situation  called  forth  leaders,  and 
they  made  it  plain  that  the  only  means  of  emancipa- 
tion was  through  organization. 

So  the  Danish  farmers  began  to  organize  coopera- 
tive societies.     In  these,  a  member  was  allowed  but 


Markets   and  Rural   Economics  119 

one  vote  regardless  of  the  number  of  shares. 

Each  member  pledged  his  product,  and  became 
liable  independently,  plus  the  unlimited  liability  of 
the  society,  to  the  government  bank  for  the  amount 
of  the  capital  borrowed. 

Today  the  Danish  farmer  neither  buys  nor  sells 
farm  supplies  individually. 

He  uses  no  seeds  till  they  have  been  tested  by  the 
experts  furnished  by  the  cooperative  society.  He 
buys  his  fertilizers,  soy  beans  from  Manchuria,  cotton 
and  meal  from  the  United  States,  through  the  co- 
operative society.  He  never  kills  his  own  hogs,  though 
there  are  500  hogs  to  every  1000  persons  in  Den- 
mark, but  sends  them  to  the  cooperative  bacon  fac- 
tories, which  were  founded  some  time  in  the  '8o's, 
when  Germany  refused  the  Danish  hog  because  of 
an  outbreak  of  swine  fever.  The  Danes  instantly 
founded,  with  the  assistance  of  the  Government,  large 
cooperative  bacon  factories.  In  order  to  make  dairy- 
ing possible  the  Danes  had  to  regenerate  the  land 
exhausted  by  the  lack  of  scientific  treatment. 

The  organization  of  cooperative  enterprises  began 
at  least  thirty  years  ago,  but  now  the  Danes  have 
one  thousand  and  eighty-seven  cooperative  dairies, 
embracing  ninety-five  per  cent,  of  all  the  farmers. 
They  ship  nearly  one  million  dollars'  worth  of  butter 
every  week  to  England.  They  have  thirty-four  co- 
oDcrative  slaughter  houses.  Their  cooperative  Egg 
Export  Society  numbers  fifty-seven  thousand  mem- 
bers, and  they  ship  $90,000,000  worth  of  butter  and 
eq-gs  a  year.  Cooperation  has  raised  Denmark  from 
the  most  impoverished  nation  in  Europe  to  a  nation 
of  home-owning,  self-sustaining:  people.  Eighty-nine 
per  cent,  of  the  families  own  their  own  homes.  Her 
2,500,000  people  have  $250,000,000  in  the  savings 


I2O  Markets   and  Rural  Economics 

banks.  They  have  a  high  standard  of  education, 
more  agricultural  schools  per  capita  and  a  greater 
percentage  of  farmers  in  the  legislature  than  any 
other  country. 

AMERICAN  METHODS 

Cooperative  marketing  among  American  farmers 
has  been  desultory.  A  few  crops  have  been  grown 
under  contracts  between  the  farmer  and  a  factory. 
These  were  confined  to  communities  adjacent  to  beet 
sugar  factories  and  canning  factories.  This  brings 
about  cooperative  marketing  by  the  farmer  automat- 
ically. The  character  of  certain  crops  renders  the 
contract  system  imperative.  No  one  would  think  of 
putting  in  a  crop  of  sugar  beets  without  first  finding 
sale  for  them.  The  same  is  true  of  tomatoes,  beans, 
roasting-ears,  etc.,  when  grown  for  canning  purposes. 
It  is  a  case  where  foreknowledge  is  a  prerequisite  to 
beginning  a  crop.  The  market  is  definite  in  price, 
time  and  place  of  delivery,  or  there  is  no  market  at 
all.  No  one  would  care  to  put  his  money  in  a  beet 
sugar  factory  or  a  canning  factory  without  making 
contracts  for  the  raising  of  sufficient  available  prod- 
ucts for  a  season's  run.  When  such  contracts  are 
signed  it  enables  the  factory  owners  to  make  sales  of 
the  products  of  the  factory  to  the  wholesale  or  retail 
trade.  This  special  kind  of  cooperation  is  in  a  class 
by  itself  with  the  farmer,  but  is  common  among  manu- 
facturers. Many  manufacturers  first  endeavor  to 
make  contracts  for  raw  material  and  for  labor  before 
they  start  out  a  selling  force  to  market  the  output. 
By  this  means  it  is  possible  to  run  a  safe  business,  as 
the  volume  of  business  will  be  limited  by  the  amount 
of  orders  received  through  the  selling  force,  the  main 
difficulty  being  to  regulate  the  contracts  for  raw  ma- 
terial and  labor  to  the  demand  for  the  product  to  be 


Markets   and  Rural  Economics  121 

supplied  to  the  trade.  In  a  few  instances,  contract 
farming  has  been  attempted  with  the  staple  and  non- 
perishable  products,  but  it  has  never  developed  to  any 
considerable  extent. 

Cooperative  marketing  of  perishable  products  by 
other  than  the  contract  system  has  made  progress  of 
recent  years.  More  than  a  half  billion  dollars  are 
invested  in  truck  farms  and  equipment.  Ten  million 
acres  reach  the  most  intensified  farming  under  the 
truck-farming  agriculturalist.  Almost  all  farmers 
have  a  garden  for  vegetables  for  home  use.  Inci- 
dentally some  of  these  sell  a  surplus,  thus  adding  to 
the  volume  of  the  trucking  business. 

LESSON  XVIII 

What  can  you  say  of  the  different  methods  and 
degrees  of  cooperation? 

Can  you  draw  a  line  of  distinction  between  a  com- 
petitive enterprise,  and  a  cooperative  enterprise? 

What  would  you  designate  as  the  individualistic 
way  of  marketing? 

What  is  the  capitalistic  way  of  marketing? 

What  is  the  cooperative  way  of  farming? 

What  makes  the  competitive  corporations'  way  of 
marketing  attractive  ? 

What  is  the  other  extreme  from  this  as  relates  to 
profits  ? 

What  is  the  most  approved  middle  ground  for 
cooperation? 

Give  advantages  of  this  method. 

Which  system  follows  most  closely  the  line  of 
equity? 

Explain  how  cattle  can  be  shipped  for  slaughter 
under  this  plan. 


122  Markets    and   Rural   Economics 

Explain  how  creameries  may  be  handled  under  this 
plan. 

Explain  how  fruit-selling  is  operated  under  this 
plan. 

Explain  how  tobacco  can  be  handled  under  this 
plan. 

Explain  how  grain  is  handled  under  this  plan. 

Explain  how  cotton  can  be  marketed  under  this 
plan. 

LESSON  XIX 

What  can  you  say  of  European  cooperative  mar- 
keting by  farmers? 

What  country  may  be  taken  as  typical  of  coopera- 
tive methods  among  farmers  abroad? 

What  was  the  moving  cause  of  the  Danes'  organi- 
zation? 

What  part  has  the  Danish  government  played  in 
aiding  the  farmers? 

What  requirements  are  made  of  the  members  of 
their  organizations? 

Does  the  Danish  farmer  buy  and  sell  individually? 

Are  they  scientific  farmers  ? 

How  long  have  the  Danish  cooperative  societies 
been  operating? 

What  can  you  say  of  their  success? 

What  are  the  conditions  in  Denmark  now  as  com- 
pared with  the  conditions  before  cooperative  organi- 
zations began  their  work? 

What  can  you  say  of  the  contract  system  of  co- 
operative marketing  in  the  United  States? 

What  of  cooperative  marketing  of  truck-farm 
products  ? 

How  far  do  you  think  it  practical  to  extend  farm- 
ing under  a  contract  system? 


Markets   and  Rural  Economics  123 

Should  there  be  an  understanding  between  all  truck- 
farming  districts  to  the  extent  that  each  district  would 
be  familiar  with  the  kind  and  amount  of  competition 
it  has  to  meet  in  each  available  market? 

Is  the  consumer  interested  in  this  the  same  as  the 
producer? 


CHAPTER  XIII 

DIFFICULTIES  IN  THE  WAY  OF  COOPERATION 

Let  us  consider  some  of  the  difficulties  that  must  be 
faced  and  overcome  in  establishing  cooperation. 

Perhaps  at  no  point  have  we  failed  to  insure  suc- 
cess more  often  than  in  our  failure  to  provide  a  work- 
ing capital  for  enterprises  established.  Enthusiasm  is 
a  good  thing,  but  it  will  not  take  the  place  of  cold 
cash  in  the  business  of  the  Twentieth  Century  when 
millions  master  the  marts.  Until  we  are  willing  to 
take  some  risk  we  will  have  to  contribute  to  those  who 
do  take  large  risks  and  control  the  industries  and 
the  commerce  of  the  country. 

For  example,  after  an  elevator  is  built  by  the 
farmers  on  some  cooperative  plan,  and  they  begin  to 
patronize  it,  some  chain  of  elevators  already  under 
one  management  will  put  up  the  price  of  wheat  at 
the  competing  elevators  with  this  farmers'  elevator, 
to  buy  off  patrons.  The  farmers  are  led  to  believe 
that  there  is  "something  dead  up  the  branch,"  as  the 
reason  that  the  farmers'  elevators  are  not  giving  as 
much  as  the  competing  lines.  In  two  years'  time  this 
old  game  of  bribing  the  farmers  to  desert  their  own 
business  gets  in  its  work  till  it  is  starved  to  death. 
This  old  trick  is  played  on  everything  the  farmer 
starts  up  and  usually  it  works.  Every  farmer  who 
bites  at  the  bait  is  a  renegade,  deserts  his  own  cause 
and  sells  out  to  his  business  enemy. 


Markets   and  Rural  Economics  125 

x^ 

/     A  very  serious  drawback  to  any  system  of  genuine 
y    cooperation  in  this  country  is  the  spirit  of  speculation 
(      that  pervades  the  people  generally.    Every  one  wants 
a  profit  greater  than  the  average  increase  of  wealth 
will  justify.     The  law  of  recompense  is  an  iridescent 
dream,  and  has  no  place  in  our  commercial  code.    For 
several  years  there  has  been  an  era  of  speculation  in 
unearned  increment  that  charms  the  investor  from  co- 
operative   enterprises.      Monopolizing   social   values 
appeals  to  us  more  than  cooperation. 

We  have  been  running  after  too  many  things. 
Dividing  our  time,  energies,  money  and  attention 
among  irrelevant  projects,  experimenting  with  every 
impractical  scheme  presented,  passing  resolutions  that 
require  more  money  than  the  organization  ever  had 
to  carry  out,  looking  for  things  to  happen  that  it 
would  take  a  miracle  to  perform.  We  expect  too 
much  and  do  not  give  credit  for  the  results  obtained. 

f  Another  reason  why  it  is  hard  to  secure  coopera- 
tion among  farmers  is  that  the  expediency  of  holding 
non-perishable  products  off  the  market  as  a  means  of 
securing  better  prices  has  so  often  been  resorted  to 
only  result  in  benefiting  those  who  would  not  hold 
that  it  discourages  the  loyal  members  of  the  holding 
movement.  The  loyal  man  becomes  exasperated  and 
he  gets  tired  of  holding  the  bag  while  the  profits  go 
to  the  recalcitrant  farmer  who  cares  for  nothing  but 
self.  This  has  occurred  in  the  wheat,  tobacco,  and 
\  cotton  belts  time  and  again.  Night-riding  in  the 

\obacco  country  grew  out  of  this  very  condition. 

The  place-hunter  we  have  always  with  us.  It  is 
so  often  the  case  that  men  who  want  positions  are  all 
right  as  men,  but  totally  unfit  for  the  particular  place 
which  they  seek,  and  it  is  not  always  that  they  seek 
the  place,  but  have  it  thrust  on  them.  They  go  in 


126  Markets   and  Rural  Economics 

with  the  best  of  intentions,  but  make  a  mess  of  things. 
They  have  friends  who  won't  stand  for  them  to  be 
humiliated  by  a  dismissal,  and  so  a  feud  is  started, 
which  results  in  a  "rough-house"  and  the  business  is 
destroyed.  It  has  proved  more  than  satisfactory  for 
the  local  managers  to  be  selected  for  their  proficiency 
after  the  manner  that  corporations  select  their  em- 
ployees. 

The  lack  of  a  feeling  of  common  interest  between 
the  well-to-do  farmer  and  the  dependent  farmer  is  a 
serious  hindrance  to  the  cooperation  of  the  farmers 
as  a  whole.  The  prosperous  farmer  is  satisfied  and 
does  not  care  to  assume  his  weaker  brother's  burden. 
The  dependent  farmer  feels  helpless  and  does  not 
feel  like  trying  to  do  anything.  So  the  bulk  of  the 
work  has  fallen  upon  the  middle-class  of  farmers  to 
develop  the  plans  and  support  the  institutions  estab- 
lished. 

Some  are  not  satisfied  with  the  progress  made.  The 
question  naturally  arises:  Is  the  case  hopeless?  Do 
you  surrender? 

Liberty  means  responsibility,  and  when  you  shun 
the  latter  you  are  unworthy  of  the  former. 

Come  up  to  the  requirements  or  take  the  conse- 
quences. There  is  no  dodging  the  task  without  suffer- 
ing the  penalty.  Get  a  ticket  or  walk  the  ties.  Work 
or  starve.  Organize  or  lose  your  heritage.  Get  in 
line  or  get  out. 

Hard  orders  these,  but  imperative. 

Do  You  WANT  COOPERATION  ENOUGH  TO  HELP 
MAKE  IT  A  SUCCESS? 

uWords  pay  no  debts — give  us  deeds." 

— Shakespeare. 


Markets   and  Rural   Economics  127 


"Go  put  your  cre^d  into  your  deed, 
Nor  speak  with  double  tongue. " 

— Emerson. 

Life  in  the  main  is  a  question  of  preference.  We 
do  what  we  prefer  to  do.  We  can  have  cooperation 
if  we  want  it  or  we  can  have  the  opposite.  It  is  solely 
a  question  of  choice.  Cooperation  is  a  thing  to  be 
done  and  not  just  indorsed  and  talked  about. . 

Do  you  really  want  it?  is  the  question  that  will 
be  solved  by  what  you  do  and  not  by  what  you  profess 
or  promise. 

Cooperation  carries  equity  to  its  finality.  It  fol- 
lows the  law  of  recompense  in  all  transactions.  It 
renders  impossible  private  monopolies.  It  takes  cus- 
tomers^into  partnership  with  stockholders  and  dis- 
tributSPs  to  each  according  to  his  due.  It  gives  credit 
and  recognizes  as  a  partner  the  patron  of  its  institu- 
tions as  well  as  those  who  found  them  and  those  who 
operate  them.  A  genuine  cooperator  is  willing  to 
support  an  institution  which  protects  him  whether  he 
utilizes  it  directly  or  not. 

The  speculative  spirit  is  so  strong  in  the  average 
American  that  if  you  propose  to  take  his  money  and 
use  it  to  secure  equity  for  the  poor,  without  return- 
ing speculative  profits  to  him,  he  passes  you,  like  the 
priest  and  the  Levite,  on  the  other  side,  and  leaves 
the  proposition  and  the  task  for  the  Good  Samaritan. 

Deception,  graft,  and  robbery  bring  their  rewards, 
and  industry  pays  the  penalty.  The  world  has  always 
paid  and  is  still  paying  an  enormous  tribute  to  waste 
incident  to  greed,  dishonesty  and  ignorance.  The 
opposite  of  cooperation  is  the  creed  that — 


128  Markets   and  Rural  Economics 

"He  may  take  who  has  the  power 
And  he  may  keep  what  he  can." 

Which  do  you  prefer? 

Cooperation  has  been  misused  and  misapplied  so 
much  that  it  has,  to  a  great  degree,  lost  its  meaning. 
Grafters  hate  it,  the  speculator  thinks  it  a  joke,  the 
commercial  buccaneer  thinks  only  fools  would  prac- 
tice it. 

Anything  run  on  the  cooperative  plan  is  no  "get- 
rich-quick"  scheme.  That  is  why  it  does  not  appeal 
to  the  over-thrifty  as  a  rule.  The  money  maker  is  not 
attracted  by  a  business  proposition  based  on  cooper- 
ative economics.  It  looks  too  slow. 

Any  mercantile  establishment  that  does  not  dis- 
tribute to  customers  net  profits  above  a  just  return 
for  capital  is  not  cooperative,  and  to  call  it  such  is 
a  misnomer.  A  selling  agency  that  does  not  apply 
this  principle  to  its  business  is  not  cooperative.  This 
applies  to  wheat  elevators,  cotton  warehouse  com- 
panies, tobacco  warehouse  companies,  etc.  If  a  man 
is  a  member  of  one  of  these  associations  or  companies 
and  then  does  not  patronize  it,  he  is  not  a  cooperator. 
If  he  sells  through  other  channels,  even  though  he 
gets  more  for  his  product,  and  does  not  pay  his  pro- 
portion of  commission  just  the  same,  to  support  his 
own  institution,  he  is  not  a  co-operator. 

Now,  what  are  you  ? 

Half-hearted  cooperation  seldom  succeeds.  Gen- 
uine cooperation  cannot  help  but  succeed  if  it  has  suf- 
ficient members.  Tell  me,  will  you,  how  a  business 
that  has  a  reasonable  number  of  customers  can  fail 
when  each  customer  is  absolutely  loyal  to  it,  and  com- 
petent men  manage  it?  When  you  fail  to  be  loyal, 
you  fail  to  cooperate.  Cooperation  cannot  extend 


Markets   and  Rural  Economics  129 

beyond  loyalty.  Loyalty  is  the  very  heart  and  pulse- 
beat  of  cooperation.  To  denounce  a  thing  as  a  fail- 
ure after  you  have  killed  it  by  your  own  desertion  is 
not  only  the  height  of  folly  but  it  is  a  denunciation  of 
your  own  conduct. 

Genuine  cooperation  is  the  religion  of  justice.  It 
is  taking  a  firm  hold,  and  will  prove  the  citadel  of 
refuge  for  the  wealth  producer.  Things  have  to  get 
desperate  before  people  are  willing  to  cooperate. 
This  was  the  case  when  the  poor  weavers  organized 
for  mutual  help  in  1844  in  the  town  of  Rochdale, 
England.  From  that  small  beginning  has  grown  the 
largest  commercial  firm  in  the  world. 

A  commercial  enterprise  cannot  be  cooperative  that 
does  not  adhere  strictly  to  the  two  basic  principles  of 
business  cooperation : 

1 i )  Absolute  loyalty  of  the  member. 

( 2 )  A  return  to  him  of  the  net  profits  made  from 
his  patronage. 

(3)  Members  vote — not  money. 

It  matters  not  whether  the  company  is  organized 
to  sell  for  its  patrons,  or  to  buy  for  its  patrons,  or  to 
do  both;  the  same  principle  applies.  It  is  the  same  in 
manufacturing,  transporting,  banking  or  in  any  other 
business. 

It  is  not  so  hard  to  incorporate  the  feature  of  re- 
funding profits  to  the  members  of  the  society,  but  it 
is  a  task  to  compel  this  same  member  to  be  loyal  to 
his  own  institution. 

Right  here  is  where  the  battle  has  got  to  be  fought 
out  in  establishing  cooperative  enterprises  on  a 
permanent  basis. 


130  Markets    and   Rural  Economics 

WHY  IT  HAS  BEEN  PUSHED  FURTHER  ALONG  IN 
EUROPE  THAN  IN  AMERICA 

Why  do  the  people  of  Europe  take  to  cooperation 
more  readily  than  in  the  United  States?  This  ques- 
tion very  naturally  comes  to  one's  mind  when  it  is 
seen  how  much  further  along  the  Europeans  are  in 
cooperative  enterprises  than  we  are  in  America.  Is 
it  an  evidence  of  the  superior  intelligence  of  the  Amer- 
ican citizen  that  he  refuses  to  be  a  cooperator? 

No. 

Is  the  fact  that  the  European  is  ahead  of  the  Amer- 
ican in  establishing  cooperative  enterprises  evidence 
that  the  European  is  possessed  of  a  higher  order  of 
intelligence  than  the  American? 

No. 

Then,  why  the  difference? 

•Because  conditions  are  different. 

Europe  is  old;  America  is  new. 

The  wonderful  opportunities  for  amassing  wealth 
and  the  examples  of  it  have  stimulated  a  hope  for 
rewards  for  individual  development  of  this  country 
and  the  astounding  increases  in  value  have  led  to  for- 
tunes being  made  by  unearned  increment  on  every 
hand  till  the  country  is  literally  saturated  with  the 
speculative  mania.  No  one  is  willing  or  content  to 
profit  only  by  meager  savings  from  a  moderate  wage 
at  hard  labor.  Each  one  wants  to  make  a  bunch  of 
money  quickly  without  any  thought  of  giving  an  equiv- 
alent. These  things  being  impossible  in  Europe,  the 
very  thought  of  it  has  died  in  the  mind  of  the  average 
citizen. 

There  it  is  a  question  of  making  both  ends  meet. 

Here  it  is  a  question  of  winning  prizes  in  the  stren- 


Markets   and  Rural   Economics  131 

uous  scramble  for  spoils  in  the  game  of  riding  the 
waves  of  value  fluctuations. 

In  Europe  the  economic  question  is  one  of  saving. 

In  America  the  economic  question  is  one  of  making. 

The  corporation  that  exploits  the  public  for  its  pro- 
moters and  stockholders  is  the  American  ideal. 

The  cooperative  society  that  protects  the  citizen 
from  being  exploited  is  the  European  ideal. 

The  citizen  can  stand  more  exploitation  here  than 
there. 

When  the  American  loses  all  thought  of  being  an 
exploiter  he  will  then  get  busy  to  keep  from  being 
exnloited. 

The  American  does  not  know  the  full  meaning  of 
frugality. 

The  European  has  been  taught  frugality  by  long 
and  bitter  experiences. 

The  American  is  not  content  with  his  share  of  the 
annual  average  increase  of  wealth. 

The  European  is  proud  if  he  can  get  his  part  of 
the  average  annual  increase  of  wealth. 

Genuine  cooperation  is  the  religion  of  justice.  It 
is  equity  carried  to  its  finality.  It  is  equal  rights  to 
all  and  specific  privileges  to  none.  It  is  the  friend  of 
economy  and  production,  the  foe  of  speculation  and 
graft. 

The  most  successful  cooperative  societies  of  this 
country  were  founded  on  despair.  Desperation  had 
to  reach  a  class  of  a  community  before  they  would 
make  common  cause  and  cooperate.  They  had 
reached  the  point  of  the  European  when  they  began 
to  organize  for  mutual  help.  Cooperative  associa- 
tions are  founded  by  the  poor.  Who  ever  heard  of 
the  rich  and  prosperous  starting  out  with  a  bold  in- 


132  Markets    and  Rural  Economics 

telligence  to  cooperate  for  the  common  good,  with- 
out any  thought  of  exploiting  the  public? 

Cooperation's  message  is:  uCome,  all  ye  who 
are  weak  and  heavy  laden,  and  I  will  give  you  all 
you  deserve — and  no  more." 

Its  gospel  is  to  the  disinherited. 

Its  hand  is  never  raised  to  strike  the  just,  but  it  is 
ever  extended  to  bless  those  who  should  inherit  the 
earth. 

LESSON  XX 

Name  eight  serious  difficulties  in  the  way  of  suc- 
cessful cooperation? 

Which  do  you  consider  the  greatest? 

What  is  the  final  test  of  a  cooperation? 

What  does  cooperation  do  that  no  other  method 
of  business  does? 

Are  cooperation  and  speculation  antagonistic? 

Which  preys  upon  ignorance  and  which  deals  justly 
with  it? 

What  are  the  fundamental  requirements  for  suc- 
cessful cooperation? 

What  usually  drives  people  to  cooperate? 

Why  does  co-operation  not  take  so  well  in  America 
as  in  Europe? 

What  is  "unearned  increment"? 

What  is  meant  by  "the  average  annual  increase  in 
wealth"? 

Does  cooperation  make  for  equity? 

Who  usually  found  cooperative  associations,  the 
rich  or  the  poor? 


CHAPTER  XIV 

LEGALIZED  LOYALTY 

Why  do  we  have  contracts,  and  civil  authorities 
paid  by  the  public  and  authorized  to  enforce  con- 
tracts? 

Because  it  is  so  often  that  people  will  not  voluntar- 
ily do  what  they  have  agreed  to  do. 

Get  a  crowd  of  farmers  together,  under  pressure 
of  some  commercial  grievance,  present  a  plan  that 
will  apply  to  the  situation  and  remedy  the  trouble. 
The  plan  may  be  workable  and  it  may  be  unanimously 
adopted  with  enthusiasm  by  the  farmers  in  conven- 
tion. In  the  abstract  they  cooperate.  They  agree 
to  abide  by  the  plans  adopted.  They  really  believe 
that  they  mean  it. 

The  convention  proceeds  to  elect  officials  who  are 
to  put  into  operation  the  system  adopted,  and  ad- 
journs. 

When  each  one  who  was  a  loyal  supporter  of  the 
means  of  emancipation  in  that  rousing  convention,  is 
asked  to  come  across  as  he  agreed,  deserters  are 
found;  there  is  no  penalty;  they  multiply,  and  loyalty 
is  a  joke.  The  abstract  fails  to  materialize  because 
of  the  instability  of  those  most  concerned. 

Strange  as  it  would  seem  to  the  calm  looker-on,  the** 
country  is  literally  strewn  with  wrecked  institutions 
started  by  the  farmers  and  destroyed  by  them,  by 
deliberately  refusing  to  patronize   them   after  they 


134  Markets    and   Rural   Economics 

were  started.  Not  ail  went  down  trom  this  cause,  but 
more  from  this  than  any  other. 

To  avoid  this  rock  against  which  so  many  commer- 
cial crafts  have  crashed,  there  has  been  devised  a 
more  aggressive  and  effective  system  in  launching 
enterprises  of  a  cooperative  nature,  than  that  of  al- 
lowing patronage  to  depend  entirely  on  the  voluntary, 
spontaneous  support  and  carrying  out  of  agreements 
and  giving  of  material  aid  and  patronage  to  the  enter- 
prise. 

This  better  plan  is  to  have  a  form  of  contract  that 
must  be  signed  by  every  one  joining  the  association 
that  legally  binds  him  to  patronize  his  own  enterprise 
which  his  brain  has  devised  and  his  money  established. 

The  most  conspicuous  failures  of  farmers'  cooper- 
ative associations  have  not  had  this  clause  in  their 
contracts,  and  the  most  conspicuous  successes  have 
been  those  which  had  the  binding  contract  compelling 
loyalty  on  the  basis  of  a  forfeit  for  non-compliance 
with  the  signed  agreement.  This  is  merely  a  way  of 
avoiding  calamities  resulting  from  indifference, 
whims,  childish  vacillations,  bribe  offers  by  competi- 
tors, feudish  dissentions  based  on  personal  animosi- 
ties, clannish  prejudices,  jealousies  and  enmities  and 
general  lack  of  appreciation  of  the  results  of  dis- 
loyalty. 

Look  over  the  roster  of  those  who  can  show  results, 
have  stood  the  .test  of  time,  and  see  how  many  of 
them  have  as  a  fundamental  in  their  organization  that 
clause  in  the  contracts  binding  them  together,  which 
compels  loyalty  and  punishes  desertion. 

Some  conspicuous  examples  are:  The  California 
Fruit  Growers'  Association,  the  Kentucky  Tobacco 
Association,  the  Georgia  Fruit  Exchange,  the  Gleaner 
Elevators,  etc. 


Markets    and  Rural   Economics  135 

In  these  organizations  the  members  sign  a  contract 
to  deliver  the  product  that  is  proposed  to  be  handled 
to  the  association  and  there  is  no  way  of  avoiding  it. 
This  gives  those  in  charge  positive  assurance  that 
they  will  be  in  absolute  control  of  the  product  and 
they  can  command  attention  in  the  markets  and  make 
deals  to  advantage  and  deliver  the  goods.  Any  other 
arrangement  renders  the  agent  helpless  in  making  for 
the  company  he  represents  a  reputation  for  reliability 
and  honesty. 

WHAT  THE   CALIFORNIA   FRUIT  GROWERS  HAVE 
ACCOMPLISHED 

Out  in  California  the  citrus  fruit  growers  were 
getting  returns  in  red  ink  for  their  fruit  before  they 
got  in  earnest  and  organized.  The  California  Fruit 
Growers'  Exchange  is  the  outgrowth  of  their  troubles. 
It  ships  annually  20,000  cars  of  fruit.  The  system 
consist  of  the  local  associations,  the  district  exchanges 
and  the  general  Fruit  Growers'  Exchange.  Separate 
contracts  link  the  three  together.  The  grower  con- 
tracts with  the  local  associations;  the  local  associations 
contract  with  the  district  exchanges;  and  the  district 
exchanges  contract  with  the  California  Fruit  Growers' 
Exchange.  There  are  more  than  eighty  associations 
covering  every  citrus  fruit  district  in  California,  and 
packing  nearlv  200  guaranteed  brands  of  oranges  and 
lemons.  The  local  exchanges  elect  the  directors  of  the 
General  Exchange. 

From  top  to  bottom  the  organization  is  planned, 
dominated  and  controlled  bv  growers  for  the  mem- 
bers. No  corporation  or  individual  reaps  from  it 
any  dividends  or  private  gain. 


136  Markets    and   Rural  Economics 

A  part  of  section  nine  of  the  contract  between  the 
grower  and  the  local  association  reads  as  follows : 

Therefore  each  of  the  second  parties  ex- 
pressly stipulates  and  agrees  that  he  will  not 
sell  or  otherwise  dispose  of  his  said  fruit  to 
any  person  or  corporation  other  than  to  said 
first  party,  as  herein  provided;  and  that  in 
case  he  shall  fail,  refuse,  or  delay  to  pick 
and  deliver  his  said  fruit  to  the  first  party, 
within  five  days  after  demand  therefor,  the 
first  party  shall  have  the  right  at  his  option, 
at  any  time  or  times  thereafter,  and  from 
time  to  time,  to  enter  into  possession  of  said 
premises  and  pick  his  said  fruit,  or  any  part 
thereof,  and  take  the  same  to  the  packing- 
house of  the  first  party,  and  pack,  sell  and 
market  the  same,  all  at  his  cost  and  expense, 
which  said  cost  and  expense  shall  and  may 
be  retained  by  the  first  party  out  of  any 
monies  received  from  the  sale  of  any  of  his 
fruit. 

A  part  of  the  contract  between  the  local  associa- 
tions and  the  district  exchanges  reads  as  follows : 

The  parties  of  the  second  part  do  hereby 
severally  agree  to  market  all  fruit  now  con- 
trolled by  them  or  that  may  hereafter  come 
under  their  control  during:  the  term  of  this 
agreement  through  said  first  party,  it  being 
understood  and  agreed  that  the  said  party 
of  the  first  part  has  entered  into  an  agree- 
ment with  the  California  Fruit  Growers' 
Exchange  for  the  sale  of  said  fruit  in  ac- 


Markets   and  Rural  Economics  137 

cordance  with  the  general  plan  adopted  by 
said  Exchange,  to  which  plan  and  agree- 
ment reference  is  hereby  made,  and  the 
same  is  hereby  made  a  part  of  this  agree- 
ment. 

A  part  of  the  contract  between  the  district  ex- 
changes and  the  General  Exchange  reads  as  follows : 

Said  second  party  agrees  that  if  at  any 
time  during  the  life  of  this  agreement  it 
fails  to  ship  all  its  citrus  fruits  otherwise 
than  as  herein  agreed  upon,  that  it  will  for- 
feit and  pay  as  liquidated  damages  to  party 
of  the  first  part,  an  amount  equal  to  25 
cents  a  box  on  all  such  citrus  fruits  which 
are  or  may  be  shipped  or  sold  elsewhere 
than  as  stipulated  in  this  contract,  providing 
the  first  party  was  ready  and  willing  to  re- 
ceive and  handle  such  fruit. 

These  California  Fruit  Growers  have  made  a  suc- 
cess operating  under  these  rules,  and  they  had  made 
failures  working  without  them.  The  old  saying  that 
rules  that  govern  least  govern  best  will  not  hold 
good.  That  old  slipshod  way  of  starting  a  business 
and  then  saying  that,  "I'll  see  after  it  if  I  want  to, 
and  if  it  does  not  suit  me  to  stay  with  it  I  will  do 
as  I  please  about  it"  will  not  work.  That  policy  has 
ruined  many  a  cooperative  dream.  Consulting  our 
whims  instead  of  business  principles  will  never  de- 
velop anything  but  failures.  A  cooperative  enter- 
prise is  your  business  if  you  are  a  partner  in  it;  it  is 
not  the  other  fellow's  affair  set  up  to  work  for  whether 
you  work  for  it  or  not, 


138  Markets    and   Rural   Economics 

The  Florida  Citrus  Exchange  has  contracts  which 
compel  loyalty,  (a)  A  contract  between  the  Citrus 
Growers'  Association  and  the  members  composing  it. 
(b)  Between  the  Sub-Exchange  and  the  Citrus  Grow- 
ers' Association,  (c)  Between  the  Florida  Citrus 
Exchange  and  the  Sub-Exchange. 

A  part  of  the  contract  reads:  "That  the  said  first 
party  is  hereby  appointed  and  made  sole  agent  of 
the  second  party,  and  shall  have  the  exclusive  right 
to  market,  and  shall  market,  all  of  the  citrus  fruit 
embraced  in  the  foregoing  contract."  .  .  Another 
part  of  the  contract  reads:  uThe  actual  damages 
sustained  by  the  first  party  because  of  a  breach  of 
this  contract  by  the  party  of  the  first  part  are  now 
impossible  of  determination,  and,  therefore,  the  same 
estimated  and  agreed  upon  as  fifty  cents  (;oc)  for 
each  box  of  fruit  so  withheld  from  the  Florida  Citrus 
Exchange  by  the  party  of  the  second  part,  which 
sum  shall  be  allowed  as  liquidated  damages  in  any 
action  brought  by  the  first  party  to  recover  damages 
for  the  breach  of  this  agreement  by  the  second  party, 
should  the  first  party  elect  as  it  may  elect  to  bring 
such  action." 

The  Hood  River  Apple  Growers'  Association  in 
Oregon  works  under  even  more  drastic  rules  than 
the  California  fruit  growers.  They  have  succeeded 
wonderfully. 

Are  you  ready  to  be  governed  by  such  iron-clad 
rules  as  that?  If  you  are,  vou  are  ready  to  cooperate. 
If  you  are  not  willing  to  abide  by  the  rules  and  laws 
of  cooperation,  then  you  are  not  a  cooperator. 


Markets    and  Rural   Economics  139 


EXPERIENCE  OF  THE  TOBACCO  RAISERS 

Under  the  domination  of  the  Tobacco  Trust,  the 
territory  growing  tobacco  was  laid  off  in  districts  and 
divided  among  those  who  bought  from  the  farmers. 
The  price  was  gradually  reduced  till  all  profits  were 
gone  and  the  farmers  were  in  poverty  and  distress. 
Various  organizations  of  tobacco  growers  sprang  up, 
the  purpose  of  these  organizations  being  to  more  ad- 
vantageously market  the  crop.  Unpleasant  friction 
soon  generated  ill  feeling  between  the  buyer  and 
seller,  which  brought  on  night-riding  with  all  its 
sensational  consequences. 

The  price  of  tobacco  was  doubled  and  trebled,  but 
the  merry  war  went  on. 

The  one  great  secret  of  the  power  of  the  tobacco 
organization  was  the  principle  upon  which  they  oper- 
ated— securing  pledges  beforehand.  Pledges  of  this 
character  would  not  be  legal  in  many  States.  The 
Kentucky  legislature  passed  a  special  act  covering  this 
kind  of  contract.  Some  States  have  outlawed  mort- 
gages given  on  crops  before  they  are  planted,  and 
some  extend  it  to  gathering.  So  to  contract  to  de- 
liver something  that  does  not  exist,  and  may  never 
exist,  at  a  certain  time  designated  in  the  future,  is 
legal  in  some  States  and  not  in  others.  The  cotton 
raisers  around  Imperial,  California,  organized  a  com- 
pany and  signed  pledges  or  contracts  to  deliver  their 
cottonseed  to  it,  hypothecated  these  contracts  as  se- 
curity for  loans  and  secured  capital  to  put  up  their 
own  ffins  and  oil  mills. 

Without  the  power  to  secure  pledges  from  the 
grower  the  tobacco  associations  would  have  been 
failures  from  the  beginning.  An  immediate  bonus 


140  Markets    and  Rural  Economics 

offered  from  the  outside  will  get  in  its  work  without 
this  protection. 

This  does  not  mean,  of  course,  that  failures  can- 
1  not  be  made,  even  with  this  advantage.  Bad  man- 
agement can  wreck  any  concern,  commercial  or  other- 
wise. 

Bickering  and  strife  arose  among  the  tobacco  or- 
ganizations and  they  began  to  dissolve.  The  mem- 
bers were  envious  and  jealous  of  the  remuneration 
that  some  of  the  officers  were  getting.  The  system  of 
organization  government  was  not  as  automatic  as 
was  desired  by  many.  Those  who  owned  the  ware- 
houses and  those  who  advanced  money  on  the  stored 
tobacco  were  often  closely  connected  with  those  in 
authority — sometimes  were  a  part  of  the  controllers 
— and  when  good  prices  were  offered  they  refused  to 
sell.  This  taxed  the  grower  and  was  to  the  advan- 
tage of  the  lender  and  the  warehousemen.  This 
brought  on  more  dissatisfaction.  More  dissolving 
and  less  cooperative  power  was  the  result. 

Had  they  been  managed  with  consummate  skill, 
had  they  retained  the  full  confidence  of  the  member- 
ship, had  the  system  of  management  been  held  to 
strict  equity,  the  tobacco  growers  would  have  been 
invulnerable. 

What  the  final  outcome  will  be  depends  on  the 
sagacity  of  the  members  and  the  exigency  of  the  de- 
mand for  action.  As  necessity  is  the  mother  of  inven- 
tion, so  is  desperation  often  the  mother  of  action. 
Desperation  was  the  moving  force  in  the  organiza- 
tion of  the  growers,  and  under  fair  prices  they  began 
to  dissolve.  Like  causes  will  produce  like  effects. 
Why  is  it  that  a  voluntary  cooperation  is  not  spon- 
taneouslv  adopted  by  producers  is  a  puzzle  to  econo- 
mists and  managers  of  large  concerns. 


Markets   and  Rural  Economics  141 

There  is  no  more  successful  organization  of  pro- 
ducers in  the  country  than  the  Walnut  Growers'  As- 
sociation, of  California,  and  each  member  of  the  as- 
sociation agrees  when  he  signs  the  by-laws  to  deliver 
to  the  association  ueach  and  every  year  during  his 
membership  his  full  and  entire  crop  of  walnuts,  grown 
by  him  and  within  the  district  covered  by  the  asso- 
ciation. Said  walnuts  to  be  picked,  cured,  and  deliv- 
ered at  the  time  and  place  designated  by  the  board 
of  directors.  A  failure  to  deliver  said  crop  as  afore- 
said, or  a  sale  of  said  crop  or  any  part  thereof  to 
outside  parties,  shall  subject  each  member  so  offend- 
ing to  a  fine  not  to  exceed  $100.00  for  each  offense, 
or  to  a  forfeiture  of  membership  in  this  association 
and  the  rights  and  interest  in  or  to  the  property  of 
this  association,  or  both  such  fine  and  forfeiture  to  be 
fixed  and  declared  by  the  board  of  directors  of  the 
association  at  a  meeting  after  due  notice  to  the  offend- 
ing member." 

Article  VII  of  the  constitution  and  by-laws  of  the 
Hood  River  Apple  Growers'  Union  reads  as  follows: 
uThis  organization,  through  its  Board  of  Directors, 
shall  have  the  exclusive  and  unqualified  power  to  mar- 
ket .all  apples  grown  by  any  of  its  members.  A  con- 
tract between  each  member  and  the  Board  is  re- 
quired." 

The  Georgia  Fruit  Exchange  requires  a  shipping 
contract  from  its  members  which  provides  that  the 
member  agree  to  "make  all  consignments  of  peaches 

grown  by  me  during years,  through  the  Georgia 

Fruit  Exchange,  and  pay  eight  per  cent,  of  gross 
sales  to  cover  all  commission  and  charges.  On 
orchard  and  F.  O.  B.  sales,  I  agree  to  pay  the  Ex- 
change three  per  cent." 


142  Markets    and  Rural  Economics 

Article  IX  of  the  Constitution  of  the  East  Shore 
Produce  Exchange  of  Virginia  provides  that: 

All  stockholders  in  the  exchange  shall  be 
compelled  to  ship  through  the  Exchange, 
but  shall  be  allowed  to  sell  outside  at  an 
advance  of  not  less  than  five  per  cent,  on 
the  price  they  would  receive  at  the  Ex- 
change, provided,  however,  that  said  goods 
have  not  been  received,  inspected,  or  brand- 
ed. Any  violation  of  the  foregoing  shall 
deprive  him  of  the  rights  and  privileges  of 
the  Exchange. 

Do  the  European  cooperative  societies  have  defi- 
nite, binding  compulsory  contracts  to  compel  loyalty 
to  the  society? 

Most  assuredly  they  do. 

Cooperation  would  have  dismally  failed  in  Den- 
mark and  in  Germany  if  they  had  not  had  the  binding 
contract,  the  compulsory  feature,  in  all  agreements, 
running  from  seven  to  ten  years !  When  a  creamery 
is  started  each  member  of  the  cooperative  company 
signs  a  contract,  that  can  be  enforced  by  law  in  the 
courts  of  the  country,  that  he  will  deliver  all  his  milk 
not  required  for  family  use  to  the  creamery,  for  a 
specified  length  of  time.  Damages  can  be  collected 
for  violating  this  contract.  If  a  man  promises  under 
contract  to  deliver  the  milk  of  a  certain  number  of 
cows  for  a  specified  number  of  vears  he  is  responsible 
if  he  sells  his  farm  without  obligating  the  purchaser 
to  fill  the  contract.  If  a  man  agrees  to  furnish  the 
creamery  all  his  milk,  and  increases  his  herd  after 
the  contract  is  made,  and  sells  the  milk  of  the  in- 
creased number  of  cows  to  outside  parties,  he  is  re- 


Markets    and   Rural   Economics  143 

sponsible  and  subject  to  pay  damages.  At  short  in- 
tervals all  milk  is  sampled  and  tested  by  experts.  If 
any  customer's  lot  does  not  come  up  to  the  standard 
in  quality,  with  all  that  quality  means,  his  milk  is 
refused  till  he  makes  amends. 

Legalized  loyalty  is  the  only  kind  that  can  be 
banked  on,  the  only  kind  that  has  conspicuously  made 
good,  the  only  kind  that  stands  the  test  of  adversity. 
Those  who  would  be  loyal  without  signing  are  no 
worse  off  when  they  sign,  and  those  who  will  not  sign 
cannot  be  depended  on.  If  they  do  not  sign  a  bind- 
ing contract  to  stand  hitched,  just  as  a  man  has  to 
do  when  he  gives  his  note  or  signs  any  other  legal 
document,  he  is  looking  for  a  chance  to  break  loose. 

LESSON  XXI 

How  has  legalized  loyalty  been  secured  by  some 
cooperative  associations? 

Why  does  the  law  provide  for  contracts  enforcible 
by  civil  process? 

What  are  the  contracts  binding  together  the  three 
parties  concerned  in  the  organization  of  the  citrus 
fruit  growers  in  California? 

What  has  been  the  result  of  their  operations  under 
these  rules? 

What  of  the  Hood  River  Apple  Growers'  Associa- 
tion of  Oregon? 

How  was  it  with  the  tobacco  growers  of  Kentucky 
before  organizing? 

What  was  their  method  of  getting  control  of  the 
crop  by  the  Association  ? 

What  social  disturbance  resulted? 

What  effect  had  the  Association  on  the  price  of 
tobacco  ? 


144  Markets   and  Rural  Economics 

What  was  the  main  element  of  its  power? 

Name  some  of  the  things  that  caused  the  Associa- 
tion to  begin  to  dissolve? 

Could  they  have  been  avoided? 

What  can  you  say  of  the  rules  of  the  Walnut  Grow- 
ers' Association  of  California,  to  secure  loyalty? 

What  has  been  its  success  ? 

WHat  of  the  rules  of  the  Georgia  Fruit  Exchange? 

What  of  the  rules  of  the  Produce  Exchange  of 
Virginia  ? 

What  of  the  law  governing  certain  of  these  con- 
tracts ? 


CHAPTER  XV 

How  TO  ORGANIZE  AND  OPERATE  A  COOPERATIVE 
COMPANY 

How  to  Distinguish  Between  a  Cooperative  and  a 
Copartnership  Company 

A  cooperative  company  needs  to  be  incorporated 
the  same  as  a  private  company  organized  on  the  or- 
dinary plan.  The  first  thing  one  should  know  before 
undertaking  a  cooperative  enterprise  is  the  kind  and 
amount  of  business  that  may  reasonably  be  expected. 
One's  judgment  should  not  be  warped  by  one's  desires, 
but  the  cold  facts  should  be  digested  before  an  attempt 
is  made  to  get  any  one  into  an  association.  This  in- 
formation can  be  secured,  getting  the  statistics  of 
the  amount  produced  in  the  line  contemplated  by 
those  who  will  join.  The  amount  raised  for  market 
can  be  ascertained  by  writing  to  the  department  at 
Washington  requesting  a  statement  of  production  in 
a  given  territory  (bounded  by  statistical  districts). 
The  willingness  of  the  farmers  to  join  you  in  the 
contemplated  enterprise  can  be  ascertained  by  get- 
ting up  your  articles  of  agreement  and  making  a 
personal  canvass  and  getting  signers.  You  should 
be  careful  not  to  arouse  unreasonable  expectations  in 
the  minds  of  those  who  are  to  join  you  in  your  Ven- 
ture. You  must  ascertain  whether  there  is  a  com- 
munity of  interest  in  the  district  from  which  your 
association  is  to  draw  its  support;  study  the  psycho- 


146  Markets    and   Rural   Economics 

logical  aspect  of  the  situation;  whether  the  people 
concerned  are  homogeneous  or  the  community  is  rent 
with  neighborhood  teuds;  whether  they  are  of  dif- 
ferent nationalities,  but  capable  of  organizing,  or 
whether  there  is  an  impassable  gulf  between  them; 
whether  the  people  are  of  the  same  race  or  of  dif- 
ferent races;  if  different  races,  whether  it  is  in  that 
part  of  the  country  where  the  two  will  cooperate  in  a 
business  way,  or  whether  it  is  in  a  part  of  the  country 
where  they  will  not  cooperate  at  all.  Conditions  can 
be  such  that  cooperation  is  impossible.  Conditions 
may  be  such  that  it  is  easier  to  cooperate  than  to 
compete. 

Usually  one  of  the  hardest  things  for  an  organizer 
or  the  manager  of  a  cooperative  association  to  learn 
is  how  to  manage  the  members  of  the  association, 
how  to  manage  not  only  the  business  per  se  but  the 
men  behind  the  business — the  patrons. 

It  calls  for  generalship,  patience,  forbearance,  for- 
titude and  long-suffering  that  few  have  in  the  re- 
quired degree.  The  man  who  fills  the  bill  has  to 
learn  how  to  be  managed  without  getting  disgusted 
and  deserting.  He  must  take  it  for  granted  that  he 
will  be  suspected,  doubted,  envied,  misunderstood, 
even  by  well-wishers.  He  will  be  treated  to  all  this 
by  those  who  do  not  wish  him  well,  and  hate,  jeal- 
ousy and  spite — open  or  secret — added  and  com- 
pounded. The  man  not  gifted  with  forbearance  and 
self-control  is  not  suited  to  this  kind  of  business. 

Taking  it  for  granted  that  you  have  the  required 
conditions,  have  the  right  man  as  a  manager  and  the 
right  kind  of  a  system,  there  is  no  risk  of  failure. 
Take  it  for  granted  that  you  are  going  to  organize 
a  cooperative  company,  how  would  you  go  about  the 
legal  part  of  the  business? 


Markets   and  Rural  Economics  147 

The  national  government  does  not  issue  corpor- 
ation charters,  except  for  national  banks  (although 
considerable  agitation  is  on  for  requiring  certain  cor- 
porations to  take  out  federal  licenses)  and  the  laws 
regulating  corporations  differ  in  the  various  States. 
Although  the  red  tape  necessary  to  incorporate  an 
association  differs  in  each  State  from  that  in  every 
other  State,  and  the  nature  of  the  corporation  which 
is  to  be  created  determines  some  of  the  details,  we 
suggest  the  following  as  a  guide  to  the  general  re- 
quifements : 

Write  to  the  Secretary  of  State  giving  the  char- 
acter of  corporation  you  wish  to  launch,  and  ask  for 
blank  application  suitable  for  such  corporation.  When 
he  forwards  you  the  blanks  you  get  together  the 
required  number  of  incorporators  and  there  write 
out  the  application  for  charter,  stating  the  kind  and 
character  of  business  you  propose  to  engage  in,  being 
sure  to  include  everything  necessary  for  the  conduct 
of  the  business.  You  do  not  have  to  do  all  that  you 
are  privileged  to  do  under  the  charter,  but  you  can 
not  do  anything  which  is  not  specified  in  the  charter. 
It  might  be  well  to  get  blanks  from  different  States, 
as  some  States  are  more  favorable  to  certain  cor- 
porate business  than  other  States,  and  you  can  incor- 
porate in  one  State  and  operate  in  any  or  all  other 
States;  however,  you  would  have  a  specified  habitat  in 
the  State  in  which  you  incorporated,  and  this  would 
not  be  practical  in  the  case  of  a  concern  doing  a  local 
business  only. 

After  you  have  written  your  charter  application, 
you  go  to  your  county  court  clerk  and  have  it  regis- 
tered, and  each  of  the  incorporators  sign  the  ap- 
plication under  the  required  regulations.  Paying  the 
fees  for  this  you  send  the  application  to  the  Secretary 


148  Markets    and   Rural  Economics 

of  State  with  the  required  fees.  These  fees  and 
taxes  are  based  on  the  amount  of  the  capital  stock, 
and  not  upon  the  actual  assets  of  the  corporation. 
When  the  corporation  is  established  and  owns  prop- 
erty it  will  pay  taxes  on  its  property,  but  is  not  re- 
leased from  the  taxes  on  the  franchise  or  corporation 
capital  stock.  When  the  Secretary  of  State  properly 
records  your  corporation  and  puts  the  great  seal  of 
the  State  on  your  charter  it  is  forwarded  back  to 
the  county  court  clerk,  where  he  makes  note  in  his 
records,  and  then  it  is  forwarded  to  the  one  designated 
by  the  incorporators,  and  you  are  ready  for  business. 

The  first  order  of  business  would  be  to  write  your 
Constitution  and  By-Laws.  At  this  point  you  deter- 
mine the  character  of  the  company  more  than  in  the 
articles  of  incorporation,  except  with  regard  to  the 
kind  of  business  in  which  you  propose  to  engage.  The 
constitution  part  is  simply  telling  of  what  the  cor- 
porate body  is  composed.  Here  you  can  limit  it  to 
the  officials  or  .extend  it  to  the  entire  membership ; 
you  can  make  your  own  laws,  and  are  therefore  in  a 
sense  a  law-making  body.  You  prescribe  the  duties 
of  the  officials,  their  powers  and  prerogatives.  Your 
by-laws  lay  out  the  rules  of  action  governing  the 
management,  control,  operation,  etc.;  the  time,  man- 
ner, method,  and  order  of  electing  officials;  the  re- 
lationship of  the  membership  body  to  the  official  body, 
their  mutual  checks  and  balances;  the  disposition  of 
profits  and  losses,  and  the  relationship  of  the  mem- 
bers to  the  patrons  who  are  not  members  of  the 
corporate  association. 

When  you  have  done  all  these  things  you  are  ready 
to  sell  stock,  and  get  in  as  many  members  as  are 
needed  to  make  the  business  a  success.  You  could 
sell  stock  before  you  adopted  your  constitution  and 


Markets   and  Rural  Economics  149 

by-laws,  but  the  chances  are  that  the  prospective  stock- 
holder would  prefer  to  know  the  system  under  which 
you  are  to  operate  before  he  joins.  A  few,  however, 
might  prefer  to  join  before  the  adoption  of  by-laws, 
so  as  to  have  something  to  say  in  the  making  of  them. 
The  constitution  and  by-laws  are  subject  to  change 
by  proper  process. 

We  should  note  the  difference  between  cooperative 
production  and  copartnership  production.  Copart- 
nership unites  stockholder  and  employee.  Coopera- 
tive business  eliminated  the  capitalists  as  a  separate 
party;  the  capitalist  is  either  absorbed  as  a  member  of 
the  cooperative  business  or  he  is  eliminated  from  the 
industrial  entity.  When  an  ordinary  corporation 
adopts  a  system  of  distribution  of  profits  to  its  em- 
ployees it  is  a  copartnership  in  a  profit-sharing  sense, 
but  not  in  an  ownership  or  management  sense.  A  co- 
operative profit-sharing  partnership  is  mutual  in  gov- 
ernment and  ownership.  The  line  of  distinction  is 
less  marked  when  the  employee  is  a  stockholder,  with 
power  as  a  stockholder  to  have  a  voice  in  the  man- 
agement, and  also  shares  in  the  net  profits  over  and 
above  his  regular  wages.  An  ordinary  corporation 
may  evolve  into  a  cooperative  corporation,  and  vice 
versa.  In  a  cooperative  company  the  capital  is 
treated  as  an  employee  at  a  fixed  wage,  on  a  percent- 
age basis.  It  has  no  voice  in  management,  or  ratio 
of  increase  or  decrease  on  the  rise  and  fall  of  profits. 
In  an  ordinary,  old-line,  close  corporation  the  cap- 
ital is  treated  as  the  owner  and  operator,  and  entitled 
to  all  the  profits,  and  the  employees  who  are  human 
beings  are  considered  in  the  same  light  in  a  business 
sense  that  a  machine  is  considered- — to  be  bought  as 
cheaply  as  possible,  turned  aside  at  pleasure,  and 


150  Markets    and   Rural  Economics 

have  no  part  in  the  profits  of  the  business  other  than 
the  unavoidable  wages  paid  for  service. 

The  copartnership  method  is  capable  of  infinite 
variations.  As  an  instance,  the  Sunlight  Soap  Works, 
of  Cheshire,  England,  began  a  copartnership  scheme 
in  1909  based  upon  the  creation  of  $2,500,000  worth 
of  upartnership  certificates"  and  the  issue  of  these 
certificates  rank  for  dividends  after  the  preference 
shares,  in  the  division  of  surplus  profits,  after  five  per 
cent,  has  been  paid  on  the  latter.  They  are  not 
transferable  or  marketable,  and  may  be  canceled  by 
misconduct  or  when  the  holder  leaves  the  firm's  em- 
ploy. Special  arrangement  is  made  for  their  ex- 
change for  preference  stock  when  the  holder  dies 
while  in  the  employ  of  the  firm  and  leaves  a  widow 
or  family  without  the  means  of  support. 

To  show  that  the  scheme  is  patronized  $273,000 
have  been  paid  out  in  interest  or  dividends  on  these 
certificates  to  the  employees. 

A  publisher  in  St.  Louis  (Mr.  E.  G.  Lewis)  or- 
ganized during  1912  a  publishing  company  and  sold 
profit-sharing  certificates  to  the  public  on  an  ascend- 
ing scale,  according  to  order  of  purchase.  The  profit- 
sharing  certificates  were  not  given  as  a  bonus  to  induce 
people  to  take  stock.  He  has  sole  ownership  and 
control,  but  one-half  the  net  dividends  declared  were 
to  go  to  the  holders  of  the  participating  certificates 
for  the  period  of  fifty  years.  They  are  transferable, 
and  carry  no  liability  to  the  purchaser. 

All  public  gas  companies  of  England  are  granted 
their  monopoly  under  a  charter  of  incorporation  which 
limits  the  dividends  that  may  be  paid  on  the  stock 
shares,  and  also  regulates  the  relation  between  the 
price  at  which  the  gas  is  sold  and  the  percentage  on 
shares.  If  profits  increase  the  shareholders  not  only 


Markets    and  Rural   Economics  151 

benefit,  but  also  the  gas  customer — for  if  the  divi- 
dends go  up  the  prices  of  gas  must  go  down.  By  a 
business  arrangement  with  the  employees  some  com- 
panies give  a  bonus  on  all  salaries  and  wages,  the 
percentage  rising  and  falling  like  shareholders'  divi- 
dends, with  the  variation  in  the  price  at  which  gas 
is  sold — one-half  is  paid  in  money  and  the  other  half 
is  used  to  purchase  shares  of  the  company  in  the 
open  market. 

Some  companies  share  all  their  excessive  gain,  or 
rather  relinquish  the  power  to  extort,  by  decreasing 
the  price  of  the  output  without  being  driven  to  it 
by  competition  or  by  law.  However,  this  is  seldom 
done. 

In  a  few  instances  the  manager  of  a  successful  plant 
will  distribute  to  his  employees  at  Christmas  time  a 
percentage  of  the  earnings  as  a  gift.  This,  too,  is 
rarely  done. 

The  operation  of  a  cooperative  company  differs 
from  the  operation  of  any  other  kind  of  company 
only  in  the  relationship  of  the  members  of  the  com- 
pany to  each  other  and  their  relation  to  the  customers 
of  the  company.  The  real  business-management  part 
of  it  is  the  same  as  that  of  any  other  kind  of  com- 
pany. It  takes  the  same  energy,  push,  sagacity,  fore- 
sight, accuracy,  promptness,  honesty,  etc.,  that  it  takes 
in  a  like  business  when  run  by  captains  of  industry, 
and  when  run  for  personal  profit  alone. 

Other  ways  of  placing  profits  should  be  noted: 
For  instance,  in  Germany  the  original  Landschaft 
companies  would  accumulate  a  surplus  or  reserve  fund 
made  from  the  excess  of  interest  paid  by  the  borrower 
over  the  amount  paid  out  on  the  bonds  based  on  the 
mortgages.  In  many  instances  the  Landschaft  used 
these  funds  to  establish  a  bank  which  took  up  the 


152  Markets    and  Rural  Economics 

bonds — the  borrower  being  paid  in  bonds  instead  of 
cash.  The  Landschaft  was  not  a  bank  and  did  not 
receive  deposits,  but  by  owning  a  bank  it  virtually 
did  a  regular  banking  business.  This  Landschaft 
bank  has  no  stockholders  1  So  we  have  the  anomaly 
of  a  few  farmers  starting  out  without  a  cent  of  cap- 
ital stock  becoming  the  owners  of  a  bonding  company 
and  a  commercial  bank  with  buildings  and  all  equip- 
ments. 

The  question  arises,  who  owns  the  bank?  The 
profits  from  the  Landschaft  were  collected  from  bor- 
rowers living  and  borrowers  long  dead.  Those  who 
have  an  equity  in  the  bank  are  the  living  who  have 
contributed  as  borrowers  and  the  heirs  of  the  dead 
who  contributed  as  borrowers — and  they  are  scat- 
tered to  the  four  ends  of  the  earth. 

Parallel  cases  could  be  cited  in  this  country  in  the 
operation  of  mutual  savings  banks,  where  the  deposi- 
tors are  the  only  beneficiaries  of  the  profits  and  are 
building  up  a  surplus.  Such  a  bank  may  have  a 
goodly  showing  of  deposits  which  it  loans  at  a  higher 
rate  than  it  pays  the  depositor;  the  difference  in  rates 
earning  more  than  enough  to  defray  the  running  ex- 
penses. These  surplus  earnings  stay  there  for  no 
particular  person  or  persons.  No  statute  or  by-law 
directs  the  distribution  of  these  earnings  to  those  who 
have  an  equity  in  them. 

There  is  still  another  way  of  placing  profit;  using 
it  to  retire  stock.  If  a  company  is  prosperous  it  may 
invest  its  earnings  in  its  own  stock  until  it  ceases  to 
have  stockholders.  This  stops  the  expense  of  stock 
dividends.  It  has  thus  reproduced  itself  and  cut  loose 
from  its  founders.  Were  a  factory  thus  manipulated 
it  would  become  a  mutualized  industrial  perpetuity  at 
the  service  of  those  who  used  it.  Its  control  would 


Markets   and  Rural   Economics  153 

have  to  be  placed  in  the  hands  of  a  self-perpetuating 
board  of  control  or  board  of  trust. 

Profits  may  be  capitalized :  this  may  be  done  by  in- 
vesting in  additional  property  or  by  improving  and 
equipping  the  property  possessed,  or  by  issuing  addi- 
tional shares  to  the  stockholders  to  cover  the  surplus 
and  thus  convert  it  into  treasury  capital. 

The  nature  of  the  business  will  determine  much  of 
the  details  of  the.  by-laws.  The  productive  company 
will  have  one  set  of  details  and  the  selling  company 
another  set  of  details,  and  the  purchasing  company 
still  another  set  of  details,  and  the  company  that  per- 
forms all  of  these  functions  will  have  its  more  or 
less  complicated  set  of  details. 

The  by-laws  should  cover  the  points  of  the  manner 
of  paying  employees,  the  manner  of  paying  for  cap- 
ital, the  consideration  given  to  the  three  living  fac- 
tors: the  employee,  the  stockholder,  and  the  patron 
or  customer.  It  should  always  lay  out  specifically 
the  regulations  as  to  whether  they  are  to  participate 
in  the  profits  and  to  what  extent.  Whether  or  not 
the  employees  are  to  come  in  for  a  percentage  of  the 
net  surplus,  based  on  wages  received;  whether  or 
not  the  stockholders  are  to  share  the  profits  above  a 
stated  percentage;  whether  or  not  the  customers  or 
patrons  who  make  the  profits  possible  are  to  have 
a  percentage  of  the  profits  or  whether  the  management 
will  be  lodged  in  a  voting  board  or  in  the  stockhold- 
ers. These,  by-laws  determine  whether  or  not  it  is 
a  cooperative  company.  See  Appendix. 

When  the  capital  is  secured  by  selling  bonds  there 
is  no  question  as  to  what  is  to  go  to  the  ones  who 
furnish  the  money,  as  the  rate  at  which  the  bonds  sell 
determines  this  point. 


154  Markets    and  Rural  Economics 

i 

LESSON  XXII 

Why  do  we  provide  for  incorporating  companies? 

What  is  the  need  of  a  cooperative  company  being 
incorporated? 

What  is  the  first  thing  that  should  be  known  be- 
fore undertaking  to  establish  a  cooperative  company? 

If  contemplating  to  organize  a  selling  company, 
what  are  the  first  steps  that  should  be  taken? 

What  would  you  consider  to  be  the  psychological 
aspect  of  the  subject? 

What  is  usually  the  hardest  part  of  the  problem? 

Name  some  of  the  essential  qualities  that  the  man- 
ager of  a  cooperative  company  should  have. 

Where  do  we  go  to  get  charters  for  corporations? 

What  is  the  first  step? 

What  should  you  include  in  the  articles  of  incor- 
poration? 

After  writing  the  charter,  what  is  the  next  step  in 
the  legal  process  of  securing  a  charter? 

What  is  the  third  step? 

When  you  have  received  your  charter,  properly 
sealed  by  the  State,  what  is  the  next  step  to  take? 

What  important  part  does  the  constitution  and  by- 
laws play  in  the  organization  and  operation  of  a  cor- 
poration ? 

LESSON  XXIII 

Draw  the  line  of  demarkation  between  a  coopera- 
tive company  and  a  copartnership  or  profit-sharing 
company. 

What  position  does  capital  hold  in  each? 

What  position  does  the  customer  hold  in  each? 


Markets   and  Rural   Economics  155 

What  position  does  the  stockholder  hold  in  each? 

What  position  does  the  employee  hold  in  each? 

Give  some  of  the  variations  which  the  copartner- 
ship method  adopts. 

In  the  business  of  marketing  the  output  of  a  factory, 
or  selling  for  farmers,  are  the  business  requirements 
different  in  a  cooperative  company  from  a  copartner- 
ship or  a  close  corporation  company? 

Draft  a  constitution  and  by-laws  for  a  cooperative 
selling  company. 

Draft  the  same  for  a  copartnership  company. 

Draft  the  same  for  a  close  corporation  company. 

Which  is  the  better  company  to  own  and  operate 
from  the  standpoint  of  individual  profits? 

Which  is  the  better  to  own  shares  in  as  a  patron  ? 

Ultimately,  which  will  result  for  the  better  for  so- 
ciety as  a  whole? 


CHAPTER  XVI 

FINDING  AND  HOLDING  CUSTOMERS  BY  MODERN 
METHODS  OF  MARKETING 

The  Task  Before  the  Farmer 

If  the  farmer  is  to  develop  a  more  economical 
system  of  marketing  than  is  now  in  vogue,  he  will 
do  so  by  appropriating  the  knowledge  gained  by  the 
experience  of  those  now  handling  the  commerce  of 
the  world.  Passing  resolutions  in  favor  of  a  change 
will  not  bring  about  a  change.  He  is  not  exempt  from 
the  law  of  the  survival  of  the  fittest  in  the  struggle 
for  business  domination.  New  channels  of  trade  are 
not  cut  by  magic.  Nowhere  is  the  power  of  the  per- 
sonal equation  more  keenly  felt  or  more  forcefully  ap- 
plied than  in  soliciting  patronage  and  holding  cus- 
tomers. 

We  have  the  local  market,  the  domestic  market, 
and  the  foreign  market.  We  have  the  perishable  and 
the  non-perishable  products.  In  each  of  these  divi- 
sions the  farmer  has  something  to  do  to  get  hold  of 
the  machinery  of  delivery  from  the  farm  to  the  fur- 
thest point  possible  toward  the  ultimate  consumer.  It 
is  not  altogether  a  question  of  salesmanship.  The 
farmer  must  not  only  know  what  is  wanted  and  raise 
it,  but  he  must  put  his  products  on  the  market  at  the 
time,  and  in  the  form  and  condition  that  they  are 
wanted.  The  farmer  has  produced  what  he  liked, 


Markets,  and  Rural  Economics  157 

and  offered  it  in  the  form  causing  him  the  least  trouble 
and  inconvenience.  He  has  done  this  mainly  because 
of  the  lack  of  knowledge  of  market  demands,  but  also 
quite  frequently  from  an  indisposition  to  meet  the  re- 
quirements. There  are  certain  lines  of  work  which 
it  is  generally  agreed  cannot  be  left  to  the  individual 
efforts  of  citizens,  such  as  maintaining  schools,  road- 
making,  maintaining  those  things  of  a  public  nature 
that  clearly  come  under  the  operation  of  a  collective 
function;  the  economical  marketing  of  farm  products 
by  the  individual  farmer  is  equally  impossible.  This 
is  true  because  the  individual  is  a  small  shipper,  and 
standardization  of  grades  is  impossible  with  small 
shipments,  and  collective  responsibility,  backed  by  rep- 
utation and  business  ethics,  make  the  collective  or 
cooperative  plan  the  preferable  and  more  profitable. 

In  handling  the  big  staple  products,  such  as  grain, 
cotton,  tobacco,  etc.,  the  first  impression  has  been  that 
the  only  thing  to  do  was  to  house  it  and  sit  down 
and  wait  for  buyers.  If  all  the  growers  of  these  prod- 
ucts had  been  organized,  and  could  do  this  indefinite 
waiting,  that  plan  would  work;  had  even  a  third  of 
either  of  these  crops  been  thus  controlled,  it  would 
have  greatly  influenced  the  trade.  But  the  fact  is  that 
there  never  has  been  a  time  when  one-twentieth  of  the 
cotton  crop  was  ever  warehoused  and  controlled  by 
any  one  body  of  organized  farmers.  The  same  is 
true  of  wheat,  and,  with  possibly  an  exception  for  a 
while  in  the  case  of  tobacco,  it  is  true  with  the  list  of 
crops  which  farmers  have  attempted  to  market  in  a 
cooperative  way.  Forcing  buyers  to  come  to  producers 
is  not  the  economical  way  to  distribute  to  consumers. 
It  is  more  expensive  for  the  unorganized  to  buy  or 
sell  than  it  is  for  the  organized.  It  is  more  economical 
for  one  concern  to  operate  as  the  selling  agency  for 


158  Markets    and  Rural  Economics 

all  of  a  product,  and  to  find  all  the  buyers  and 
deal  with  them,  than  it  is  for  all  the  buyers  to  sepa- 
rately send  their  buying  agents  to  this  concern  to  buy 
their  supplies.  It  is  cheaper  to  the  consumer  for 
all  the  berry-raisers  of  a  given  district  to  sell,  through 
one  agent,  to  all  the  buyers,  than  it  is  for  all  these 
buyers  to  send  their  agents  to  one  town  and  buy  from 
the  raisers  direct  or  from  the  raisers'  agent.  The 
cost  of  maintaining  all  these  competitive  buyers  is 
greater  than  the  cost  of  sending  selling  agents  to  the 
points  where  selling  agents  would  be  needed.  More 
can  be  sold  by  a  given  number  of  selling  agents  than 
can  be  bought  by  an  equal  number  of  buying  agents; 
the  reason  being  that  a  seller  can  cover  more  terri- 
tory than  a  buyer,  as  he  does  not  have  to  limit  his 
operations  day  by  day  to  so  small  a  territory.  A 
cotton  seller  representing  all  the  cotton  raisers  can 
visit  more  mills,  and  sell  more  cotton,than  any  cotton 
buyers  representing  one  mill  or  a  number  of  mills 
could  possibly  buy,  of  the  grades  needed  by  the  mills 
he  represents,  in  a  given  length  of  time.  A  dozen 
selling  agents  could  cover  the  spinning  districts  and 
take  orders  for  more  cotton  than  a  dozen  cotton 
buyers  could  buy,  unless  all  the  mills  bought  through 
the  agents  thus  limited,  and  could  buy  the  entire  crop 
from  a  few  offices. 

In  selling  his  output  of  surplus  the  farmer  has  either 
one  of  three  courses  open  to  him:  (a)  sell  as  he  has 
been  doing — peddle  on  the  streets  or  ship  on  consign- 
ment; (b)  organize  and  enter  the  field  just  as  the 
manufacturer  does;  or  (c)  secure  legal  pledges  from 
the  grower  of  a  percentage  of  the  crop  that  will  con- 
trol the  marketing  of  it  by  the  organization  securing 
the  pledges,  and  market  it  as  business  prudence  may 
dictate. 


Markets    and  Rural   Economics  159 

The  first  has  been  tried  for  ages,  and  found  not 
to  answer  the  demands  of  modern  conditions  and 
methods  of  business.  The  second  and  third  might 
be  co-ordinated  into  one  system  and  adjusted  to  im- 
mediate demands. 

Assuming  that  the  farmer  means  business,  and  that 
he  is  going  to  enter  the  field  of  distribution  by  co- 
operative marketing,  we  will  discuss  certain  phases 
of  the  work  which  he  must  understand,  and  certain 
business  principles  which  he  must  follow. 

In  evolving  from  the  present  to  any  other  method 
of  selling,  the  organization  that  follows  the  line  of 
least  resistance  will  be  the  most  successful.  The 
change  must  be  gradual,  and  many  will  get  impatient 
with  anything  but  a  sudden  revolution  and  preemptory 
challenge  to  the  conflict. 

The  farmer  must  learn  salesmanship.     He  must  be 
willing  to  use  those  already  trained  in  the  art  and 
thoroughly  uon  to"  their  job.     To  shake  customers 
loose  from  old  business  ways  and  associates  is  no  light 
thing.    The  biggest  firms  know  that  the  mere  sending 
out  of  salesmen  will  not  necessarily  produce  the  de- 
sired result.     The  creating  of  a  market  in  new  fields 
involves    constructive    salesmanship    of    the    highest 
order.     The  agents  of  organized  farmers  will  have 
to  compete  with  the  trained  agents  of  the  middle  men 
who  are  now  in  the  field,  and  uon  to"  all  the  arts  of 
salesmanship.     Money  will  have  to  be  spent  in  many 
lines   of  marketing,   advertising   by   personal   repre- 
sentatives, and  through  the  medium  of  the  papers  and 
magazines.     Merchants  do  not  spend  money  on  ex- 
pensive show  windows  just  for  fun.     It  pays.     Insur- 
ing the  customer  against  bad  quality  and  being  true 
to  contract  are  absolutely  essential,  but  they  are  not 
all  the  requirements.     The  looks  of  an  article  is  a 


160  Markets   and  Rural  Economics 

psychological   factor   in   establishing   and   holding   a 
trade. 

To  be  careless  about  the  appearance  of  potatoes, 
the  fruit,  the  berries,  the  vegetables,  the  grain,  cot- 
ton, etc.,  is  to  invite  your  competitor  to  get  the  trade, 
and  out-distance  you  in  the  contest  for  patronage. 
The  apple  that  is  rubbed  the  sleekest  will  sell  the 
quickest.  The  bunch  of  raisins  with  a  little  ribbon 
tied  on  it  will  sell  before  the  one  that  has  no  touch* 
of  daintiness.  The  potatoes  that  are  rubbed  and 
skinned  will  be  left  for  those  fresh  and  well  kept.  The 
same  is  true  of  butter,  eggs,  anything  and  everything 
sold.  Chickens  all  of  one  breed,  clean  and  healthy, 
will  outsell  the  motley  mixture  of  mongrels.  Knowl- 
edge of  those  with  whom  one  is  dealing  has  a  lot  to 
do  in  holding  advantage  in  the  market.  Reputation 
of  a  farmers'  selling  organization  is  as  necessary  as 
standardizing  a  brand  in  manufacturing. 

A  farmers'  selling  organization  must  compile  defi- 
nite information  on  the  cost  of  production,  the  cost 
of  selling,  cost  of  transportation  to  the  various  mar- 
kets, amount  produced  in  each  locality,  the  quality 
produced  in  each  section,  the  amount  consumed  in 
every  part  of  the  world  of  each  product,  the  quality 
consumed  in  each  locality.  This  information  will 
cost  time,  labor  and  money.  The  masters  of  com- 
merce the  world  over  have  such  information  and  no 
one  can  hold  his  owo  in  the  world  markets  without 
this  information. 

In  developing  foreign  markets,  the  idiosyncrasies 
of  the  prospective  customer,  the  habits,  customs, 
fashions,  prejudices,  racial  characteristics,  religion, 
government  and  general  characteristics  of  the  people 
must  be  studied,  and  the  conduct  of  the  salesman 
governed  accordingly.  The  man  who  has  no  tact  in 


Markets    and  Rural   Economics  161 

adapting  himself  to  new  conditions  will  never  be  a 
success  in  finding  or  creating  new  markets.  Nowhere 
is  the  test  of  salesmanship  brought  to  a  striking  com- 
parison more  than  in  South  America,  where  European 
and  American  salesmen  are  competing  for  trade. 
Germany  and  England  have  outstripped  the  United 
States  in  this  large  field  because  the  German  and 
English  merchants  were  willing  to  bow  to  the  whims 
and  customs  of  the  people  of  the  Latin  Republics. 

LESSON  XXII 

What  is  a  customer? 

Who  are  the  customers  of  the  farmer? 

How  is  the  farmer  ever  to  assume  the  task  of  find- 
ing his  ultimate  customers? 

What  is  the  personal  equation? 

How  is  it  used  to  secure  customers? 

What  two  things  are  indispensable  to  get  results 
in  trade? 

The  article  must  answer  the  needs  of  the  customer 
and  the  salesman  must  know  how  to  represent  it  in 
the  right  light,  and  of  the  two,  which  do  you  con- 
sider the  more  important? 

Name  some  of  the  things  that  cannot  be  left  to 
individual  efforts. 

Is  raising  an  article,  housing  it,  and  waiting  for  a 
buyer  all  that  is  necessary? 

Give  reasons  why  this  is  not  sufficient,  under  pres- 
ent conditions. 

Is  forcing  buyers  to  the  consumers  the  economical 
way  to  distribute? 

Explain  how  the  present  way  of  selling  perishables 
is  extravagant  because  of  duplication  of  expenses. 

Can  each  cotton  mill  send  buyers  out  to  hunt  up 


1 62  Markets    and  Rural  Economics 

the  kind  and  amount  of  cotton  it  needs  cheaper  than 
the  agent  representing  a  whole  state  of  cotton  raisers 
can  go  to  the  mills  and  sell  the  entire  output  of  the 
farmers  of  his  State? 

With  the  percentage  of  cotton  now  under  the  con- 
trol of  the  organized  farmers  what  method  of  pro- 
cedure would  be  advisable  for  them  to  pursue? 

When  his  representatives  go  out  to  compete  with 
the  present  trained  salesman  what  may  the  farmer 
expect  to  do  to  win  in  the  contest? 

Where  does  the  farmer  ufall  down"  so  often  in 
shipping  to  a  distant  market? 

Why  is  he  so  slack  in  preparing  his  stuff  for 
market? 

What  kind  of  information  must  the  managers  of 
the  farmers'  selling  agencies  possess  in  order  to  make 
a  success? 

In  developing  foreign  markets  what  must  be  taken 
into  consideration? 

Give  examples  of  how  some  have  succeeded  and 
others  failed  in  developing  markets  among  foreign 
customers. 


CHAPTER  XVII 

SELLING  FRUITS 

To  study  marketing  from  the  standpoint  of  the  in- 
dividual, with  no  thought  of  cooperating  with  any 
one  else,  is  little  better  than  a  diversion.  It  is  just 
as  absurd  to  expect  to  get  a  recipe  for  successful  mar- 
keting, and  have  nothing  to  do  but  follow  a  formula, 
and  be  put  on  the  road  to  fame  and  fortune.  Mar- 
keting problems  are  not  solved  by  square  and  compass. 
It  is  just  barely  possible  for  the  individual  to  devote 
considerable  time  to  the  study  of  markets  and  be  able 
to  turn  his  information  to  good  account.  Organized 
bodies  that  move  with  momentum  are  masters  of  af- 
fairs in  the  world  today. 

In  reviewing  the  history  of  fruit  selling  in  the 
United  States,  we  see  the  law  of  the  survival  of  the 
fittest  exemplified,  and  the  palm  is  given  to  the  fruit 
growers  who  organize  and  sell  cooperatively.  Citrus 
fruits — oranges,  lemons,  limes,  and  grape  fruit — are 
produced  in  the  United  States  only  in  the  southern- 
most parts.  The  one  problem  in  distribution  is  lo- 
cating a  market  and  getting  the  goods  there  by  the 
economical  method.  Locating  a  market  sometimes 
involves  creating  a  market  by  inducing  the  people  to 
use  the  article.  An  article  that  is  readily  perish- 
able is  dependent  upon  an  early  market  unless  it  can 
be  turned  into  a  by-product  and  sold  in  a  different 
form.  If  the  price  of  apples  is  low  the  orchardist 


164  Markets    and   Rural  Economics 

may  convert  the  product  into  vinegar,  dried  apple, 
or  preserves;  grape  growers  may  convert  their  grapes 
into  grape-juice,  wine,  jams,  etc.;  dairymen  may  sell 
milk,  cream,  butter,  cheese  or  the  animal  itself;  corn 
producers  can  sell  the  grain,  or  feed  it  to  hogs,  cattle, 
or  horses,  and  market  it. 

Citrus  fruits  do  not  come  under  this  category  of 
convertability;  they  must  be  marketed  within  the 
fruit  year  and  in  their  natural  state.  Florida  and 
southern  California  produce  most  of  the  citrus  fruits 
of  the  United  States.  Naturally  the  Florida  grower 
would  look  to  the  eastern  markets  and  the  California 
grower  to  the  western  markets.  There  is  sharp  com- 
petition from  foreign  markets,  as  $5,000,000  worth 
have  been  imported  in  a  single  year. 

The  fruit  growers  of  the  Pacific  slope  were  furthest 
from  markets  and  were  first  to  feel  the  pinch  of 
competitive  and  duplicating  methods  of  marketing. 
Not  being  acquainted  with  the  smaller  markets,  they 
sent  all  their  shipments  to  the  big  markets,  with  the 
result  that  often  the  price  would  scarcely  pay  the 
freight.  The  Orange  Growers'  Protective  Union 
was  formed  October  24,  1885,  only  to  be  destroyed 
by  the  usual  tactics  of  the  middleman — by  tempting 
growers  here  and  there  with  higher  prices,  bribing 
them  away  from  the  Union,  and  destroying  it.  The 
commission  men  then  divided  the  territory  among 
themselves  and  eliminated  competition.  Things  got 
intolerable,  and  August  29,  1893,  another  organiza- 
tion was  formed,  did  considerable  business  and 
dropped  back  to  a  fourth  of  the  crop.  Oct.  24,  1895, 
the  Southern  California  Fruit  Exchange  was  organ- 
ized. It  was  more  successful.  The  independent  ship- 
pers made  a  deal  with  the  Organization  to  work  to- 
gether, which  proved  unsatisfactory.  The  present 


Markets    and  Rural   Economics  165 

California    Fruit   Growers'    Exchange   was   incorpo- 
rated March  27,   1905. 

This  is  recounted  to  encourage  others  who  imagine 
that  it  is  a  hopeless  cause  to  try  to  organize  farmers 
in  a  business  way,  because  they  have  so  often  failed 
in  business  ventures  of  this  character.  This  exchange 
now  dominates  the  citrus  fruit  output  of  the  Pacific 
slope,  and  is  a  success. 

This  exchange  has  its  own  inspectors  at  all  the 
principal  divisions  in  the  West,  as  well  as  in  the  prin- 
cipal markets.  The  shipments  are  better  distributed, 
both  as  to  territory  and  as  to  time,  and  prices  are 
maintained  at  a  more  uniform  level.  A  claim  de- 
partment looks  after  all  claims  against  carriers,  and 
is  thus  able  to  secure  prompt  adjustment.  It  also 
maintains  a  legal  department.  It  has  instituted  a 
mutual  indemnity  company,  insuring  members  against 
loss  by  fire  on  the  property  of  the  various  associa- 
tions at  a  minimum  cost.  It  has  an  auxiliary  supply 
company  which  looks  after  all  packing  house  supplies 
for  the  members  through  the  local  associations.  The 
Citrus  Protective  League  was  formed  in  1906,  and 
looks  after  freight  rates,  refrigeration,  legislation — 
such  as  tariff,  custom  house  rules,  Inter-State  Com- 
merce regulation,  etc. 

The  115  own  the  stock  in  a  million  dollar  Orchard 
Supply  Company;  which  furnishes  boxes  and  other 
orchard  supplies  to  the  members.  It  owns  its  own 
timber-lands  and  manufactures  its  own  boxes.  In 
iQii-12  it  furnished  over  two  million  dollars'  worth 
of  boxes  and  orchard  supplies. 

The^ central  office  acts  as  a  clearing  house  of  in- 
formation. It  does  not  sell,  but  provides  the  facili- 
ties at  cost  through  which  seven  thousand  growers 
distribute  their  products.  All  offers  by  buyers  are 


1 66  Markets    and  Rural  Economics 

sent  to  the  central  office,  from  which  they  are  wired 
to  the  district  offices  and  to  the  locals.  Acceptances 
or  refusals  are  sent  back  by  the  same  route. 

All  the  facilities  provided  by  the  local,  district  and 
central  exchanges  are  furnished  at  cost.  In  1912-13 
the  total  cost  of  distributing  oranges  and  lemons  to 
wholesalers  amounted  to  only  3.23  per  cent.,  on  the 
f.  o.  b.  returns,  or  less  than  23/8  per  cent,  on  the 
gross  receipts.  It  usually  costs  the  individual  farmer 
from  7  to  20  per  cent,  on  the  gross  sales. 

The  exchanges  have  secured  from  the  railroads  a 
blanket  freight  rate  which  gives  them,  a  shipment  to 
New  York  at  the  same  expense  that  it  does  to  ship 
to  Kansas  City.  The  cars  may  be  diverted  en  route 
and  sent  to  any  point  at  the  same  cost.  This  priv- 
ilege is  a  signal  triumph  in  the  interest  of  equalizing 
prices  and  facilitating  proper  distribution. 

The  profits  of  the  company  are  distributed  pro  rata 
to  the  local  association,  on  the  basis  of  business  fur- 
nished. 

The  Florida  Citrus  Exchange  is  based  on  the  same 
plan.  To  recount  their  experience  would  be  to  repeat 
in  substance  what  has  been  said  of  others  in  the  same 
business. 

The  apple  market  is  undergoing  a  change  due  to 
the  use  of  cold  storage  by  the  farmer.  The  specu- 
lator is  no  longer  the  master  he  once  was.  The 
trade  journals  indicate  the  amount  of  storage  engaged 
by  farmers  for  their  apples  to  be  greater  than  ever 
before.  There  is  the  same  need  for  mutual  under- 
standing among  those  who  store  for  future  sale,  as 
well  as  a  thorough  knowledge  of  markets,  that  is 
needed  among  those  who  ship  direct  from  the  trees. 

Peaches,  pecans,  nuts,  etc.,  come  under  the  same 
regulations  in  the  business  of  marketing. 


Markets   and  Rural   Economics  167 


LESSON  XXIII 

What  is  the  prerequisite  for  economic  marketing? 

What  character  of  commercial  bodies  have  sur- 
vived? 

What  has  been  demonstrated  by  the  fruit  growers 
in  marketing? 

What  is  the  difference  between  locating  a  market 
and  creating  a  market? 

Name  some  farm  products  that  can  be  turned  into 
by-products  and  some  that  can  not. 

What  condition  confronted  the  Pacific  fruit  grower 
in  the  early  days  of  the  industry? 

What  has  been  the  outcome  of  these  conditions? 

Give  an  analysis  of  the  California  Fruit  Growers' 
Exchange. 

Do  its  officers  work  on  commission  or  salary? 

What  disposition  is  made  of  profits? 

What  can  you  say  of  similar  organizations? 


CHAPTER  XVIII 

COOPERATIVE  DAIRIES 

The  total  quantity  of  milk  reported  as  produced  on 
farms  during  1909  was  5,814,000,000  gallons;  there 
were,  on  April  15,  1910,  16,069,000  dairy  cows  on 
the  farms  reporting  this  milk.  The  total  value  of 
dairy  products  of  farms  in  1909,  exclusive  of  milk 
and  cream  consumed  on  the  farm,  was  reported  as 
$596,413,000.  This  represents  the  receipts  from  the 
sale  of  milk,  cream  and  butter-fat  as  $372,403,000, 
and  the  value  of  all  the  butter  and  cheese  produced 
on  the  farm,  whether  sold  or  retained  for  home  use, 
$224,000,000. 

Selling  dairy  products  in  local  markets  can  be  done 
fairly  well  by  direct  trade  by  dairymen  with  cus- 
tomers; but  even  here  the  customer  needs  protection 
against  unscrupulous  dairymen  who  pour  water  into 
their  milk  and  sell  watered  milk  instead  of  watered 
stock.  Indiscriminating  customers  who  buy  watered 
milk  encourage  the  more  honorable  dairyman  to  prac- 
tice the  same  fraud  in  order  to  hold  his  own  with 
the  dishonest  competitor.  The  law  should  prevent 
dairymen  from  watering  milk  and  the  executors  of 
the  law  should  be  as  vigilant  as  are  government  offi- 
cers in  prosecuting  "moonshiners." 

The  system  of  marketing  must  be  decided  by  the 
circumstances.  It  will  be  sold  either  direct,  through 
middlemen,  or  to  manufacturers.  If  sold  direct  to 


Markets    and  Rural   Economics  169 

consumers  it  will  be  to  hotels,  boarding  houses,  and 
soft-drink  stands  in  bulk,  or  directly  to  families  by 
delivery  wagons.  If  sold  through  middlemen  it  will 
go  to  the  wholesale  distributors  or  a  cooperative  dis- 
tributing society.  If  it  is  sold  to  manufacturers  it 
will  go  to  creameries,  cheese  factories,  or  milk-con- 
densing factories. 

It  is  cheaper  to  collect,  handle  and  distribute  ten 
thousand  pounds  of  butter  under  one  management 
than  it  is  to  have  it  done  by  various  heterogeneous 
agencies,  duplicating  expenses  and  handling  fifty  to 
a  hundred  pounds  each.  This  principle  runs  through 
the  whole  process  of  modern  evolution  of  business. 
Therefore  it  is  up  to  the  producer  to  own  the  ma- 
chinery of  distribution  and  do  his  own  delivering  at 
cost.  To  undertake  to  perform  the  function  of  dis- 
tribution without  a  system  of  cooperation  is  to  incur 
still  more  expense  than  is  taxed  on  by  professional 
distributors  who  are  not  connected  with  either  the 
producer  or  the  consumer. 

Of  course  the  first  thing  to  decide  is  whether  you 
are  to  sell  milk,  cream,  butter  or  cheese;  and  whether 
you  are  to  be  a  stockholder  in  a  creamery,  cheese  fac- 
tory, or  in  a  condensery ;  also  whether  to  have  a  local 
factory  to  ship  to  a  distant  point;  if  a  local  factory, 
whether  it  is  to  be  owned  by  those  who  own  the  cows 
or  by  others;  whether  it  is  to  begin  as  a  joint  stock 
company  or  to  be  run  cooperatively. 

If  a  cooperative  dairy  is  decided  on,  you  can  do 
no  better  than  get  the  rules  and  regulations,  contracts 
and  agreements  of  some  successful  dairy,  and  be 
guided  by  the  lamp  of  experience.  Cooperative  dai- 
ries have  passed  the  experimental  stage,  and  no  one 
need  grope  in  the  dark  as  to  the  best  methods  to 
pursue.  No  set  of  iron-clad  rules  can  be  given  gov- 


170  Markets    and  Rural  Economics 

erning  any  kind  of  business.  Fundamentals  can  be 
taught  in  any  science,  but  the  thousand  and  one  little 
details  of  application  must  be  decided  by  the  one  in 
charge.  And  upon  these  details  rest  the  success  or 
failure  of  the  business  more  than  upon  anything  else. 
A  law  school  does  not  attempt  to  teach  students  how 
to  decide  every  case  that  could  possibly  come  before 
a  judge,  nor  to  load  the  student's  mind  with  the  thou- 
sands of  acts  of  law-making  bodies,  so  that  he  will 
have  every  possible  combination  of  law  points  at  the 
end  of  his  tongue.  Such  a  course  would  be  impossible, 
and  to  attempt  it  would  be  ridiculous.  The  same  with 
the  subject  of  markets.  To  undertake  to  go  into  all 
the  details  of  every  conceivable  cooperative  business 
under  all  kinds  of  conditions  and  emergencies  would 
be  absurd. 

If  a  skimming  station  is  needed,  first  estimate  the 
cost  and  draw  up  a  contract  which  those  must  sign 
who  are  to  join.  These  contracts  should  cover  all 
essential  points  in  regulating  the  conduct  of  the  pat- 
rons of  the  station.  Each  must  accept  pay  for  butter- 
fat  and  not  for  milk;  must  patronize  with  all  mar- 
keted milk;  must  be  prompt  on  time  of  day  delivery 
is  made,  or  the  station  is  not  to  accept;  a  penalty  must 
attach  for  non-compliance  with  terms  of  contract.  If 
a  local  factory  is  to  be  established  similar  rules  are 
necessary.  If  a  distant  market  is  patronized,  it  avoids 
those  petty  worries  that  so  many  are  prone  to  leave 
to  others — and  then  grumble  for  having  to  pay  others 
for  assuming  the  worry.  If  a  local  factory  is  to  be 
established,  the  first  thing  to  decide  is  whether  it  is 
to  be  owned  by  a  joint  stock  company  or  by  the  farm- 
ers who  are  to  furnish  the  milk;  and  whether  it  is 
to  be  run  on  the  partnership  plan  or  the  cooperative 
plan.  Rules  cannot  be  too  strict  against  unclean  or 


Markets   and  Rural   Economics  171 

impure  milk,  no  matter  what  plan  of  organization  and 
operation  is  followed. 

There  should  be  cooperation  among  the  various 
local  societies  in  marketing  their  dairy  products.  In 
Denmark  they  have  the  Copenhagen  butter  quotation. 
Think  of  that!  Farm  products  "quoted"  by  the 
farmer.  This  would  be  impossible  without  a  central 
body  representing  the  local  societies  furnishing  their 
products  through  one  channel.  The  Danish  dairymen 
sell  their  butter  throughout  Europe  and  even  to  far- 
away Japan. 

It  was  found  that  certain  sections  of  Siberia  are 
well  adapted  to  the  dairy  industry,  and  thrifty  Danes 
have  emigrated  to  that  country  and  established  a 
thriving  business.  Did  they  organize  the  native  Si- 
berians into  the  same  cooperative  system  that  he 
practiced  at  home?  No.  Why?  Ah,  the  Dane 
preferred  to  teach  the  Siberian  how  to  produce,  and 
do  the  buying  and  selling  himself! 

LESSON  XXIV 

Give  some  statistics  concerning  the  dairy  industry 
in  the  United  States. 

How  many  ways  are  there  by  which  dairy  products 
are  sold? 

What  things  must  be  decided  before  steps  can  be 
taken  for  marketing  dairy  products? 

Upon  what  does  the  success  or  failure  of  this  kind 
of  business  depend? 

What  is  the  process  of  operating  a  skimming  sta- 
tion if  a  local  factory  is  to  be  operated?  Of  a  dis- 
tant market? 

Should  farmers  furnish  "quotations"  of  farm 
products? 


CHAPTER  XIX 

LIVE  STOCK:  POULTRY 

Marketing  live  stock  for  slaughter  is  one  of  the 
country's  large  commercial  industries.  The  volume 
of  business  resulting  from  the  shipping  of  live  stock 
for  slaughter  makes  it  a  very  important  department 
in  our  industry  and  commerce.  According  to  the  cen- 
sus report  of  1910,  the  total  value  of  the  live  stock 
of  the  United  States  was  $5,296,422,000.  During 
the  decade  the  value  of  the  live  stock  increased  60 
per  cent.;  the  principal  requisite  for  stock  raising, 
land,  increased  118  per  cent.  The  greater  part  of 
the  increase  was  mere  inflation  of  price,  and  not  due 
to  increase  of  intrinsic  value  due  to  improvement  of 
farms  or  to  increased  quantity  or  quality  of  stock. 
The  amount  of  slaughter-food  products  prepared  and 
processed  under  bureau  supervision  for  the  fiscal  year 
191 1 — twenty-seven  varieties — was  6,934,233,214 
pounds.  The  export  of  the  same  was  975,066,006 
pounds. 

The  selling  of  the  live  stock  for  slaughter  can  be 
done  in  but  one  of  two  ways:  offering  to  the  buyer 
who  makes  it  a  business  to  buy  and  ship,  or  doing 
your  own  shipping.  The  first  way  is  the  easiest  way. 
It  does  not  require  any  effort  or  forethought  to  have 
a  man  come  to  you  and  buy  your  stock  and  pay  you 
on  the  spot.  He  will  usually  have  you  drive  or  haul 
it.in  to  town  on  a  certain  day.  This  is  the  old  way, 


Markets   and  Rural  Economics  173 

and  causes  the  least  inconvenience.  This  buyer  offers 
a  convenient  man  to  grumble  at  about  taking  your 
stuff  for  less  than  it  is  worth.  The  other  plan  of 
shipping  to  the  stock  markets  yourself  is  impractical 
except  with  those  who  are  in  the  stock  raising  busi- 
ness on  a  large  scale,  and  can  ship  in  car-lot  loads. 
The  average  man,  who  has  a  few  head  of  stock  ready 
for  the  market,  has  no  alternative  but  to  sell  to  the 
local  buyer,  if  there  is  no  live  stock  shipping  asso- 
ciation in  his  community. 

If  a  Live  Stock  Shipping  Association  is  to  be 
formed  it  should  be  organized  on  the  contract  basis. 
Those  who  will  not  join  should  be  listed  separately, 
when  a  full  canvass  is  made  of  the  stock  raisers 
available  for  membership. 

One  of  the  greatest  obstructions  in  the  way  of  or- 
ganizing a  company  among  farmers  is  that  the  first 
thing  that  is  called  for  is  money.  He  is  asked  to 
plank  down  money  for  stock  in  the  company  or  asso- 
ciation. He  is  used  to  having  people  put  up  their 
own  money  and  then  asking  him  to  patronize  them. 
By  this  means  he  pays  for  the  organizing  by  degrees, 
and  then  does  not  own  it,  but  he  does  not  realize  it 
so  sensibly,  and  it  saves  him  some  worry.  In  organ- 
izing a  live  stock  shipping  association,  but  very  little 
money  is  needed,  and  the  most  of  it  can  be  arranged 
to  be  collected  from  the  shipments  till  the  sufficient 
amount  is  secured.  The  routine  of  organizing  and 
making  shipments  and  dividing  benefits  is  explained 
in  the  chapters  dealing  with  these  points. 

POULTRY 

The  number  of  fowls  in  the  U.  S.,  in  1909,  ac- 
cording to  the  census  report  of  IQIO,  was  295,880,- 
109;  the  number  sold  as  reported  153,600,169,  val- 


174  Markets   and  Rural  Economics 

ued  at  $75,273,524.  Eggs  reported  in  1910,  1,457,- 
385,772  dozens;  sold  as  reported  valued  at  $281,- 
157,980. 

These  figures  are  far  below  those  usually  given 
out  as  the  value  of  our  poultry  products.  The  wild- 
est exaggerations  have  from  time  to  time  got  into 
print  as  to  the  value  of  our  yearly  crop  of  eggs  and 
poultry.  The  above  figures  are  taken  from  the  last 
census  reports.  They  are  for  that  part  which  was 
marketed.  For  present  purposes  that  is  the  only 
part  about  which  we  are  concerned.  It  has  not  been 
so  long  since  the  farmer,  who  was  not  making  a 
specialty  of  the  poultry  business,  had  to  barter  his 
poultry  products  at  the  local  store.  That  is  no  longer 
the  case.  Money  is  paid  in  cash  for  everything  that 
is  marketable.  The  poultry  dealer  follows  the  con- 
centrating process,  and  gathers  large  shipments  for 
large  markets.  It  is  just  possible  that  the  salary  or 
commission  that  would  have  to  be  paid  to  the  man- 
ager of  a  poultry  shipping  association  would  amount 
to  as  much  as  is  made  by  the  professional  dealer. 

Even  though  this  might  be  the  case,  it  would  not 
bring  about  such  a  standardization  of  grades  for 
bringing  special  trade  to  the  individual  farmer,  as 
can  be  developed  under  a  properly  regulated  ship- 
ping association.  It  is  advisable  to  let  each  farmer 
have  his  own  stamp,  and  send  his  eggs  and  poultry 
to  market  under  his  stamp  and  directions.  All  eggs 
must  be  "candled"  at  the  receiving  station  and  classi- 
fied for  shipment.  Where  car-lots  of  fowls  are 
shipped  they  may  be  graded  and  classified  by  color, 
size,  etc.,  in  loading  the  car,  and  each  man  credited 
with  the  number  he  has  in  each  grade  and  paid 
accordingly  when  sold.  It  does  not  take  a  very  high 
order  of  business  experience  to  ship  a  car  of  stock 


Markets    and  Rural   Economics  175 

and  allow  them  to  take  their  usual  course  at  the 
big  markets.  Neither  does  it  take  so  much  acumen 
to  handle  fowls  in  a  similar  manner.  Nevertheless 
a  blundering  bunglesomeness  can  cause  loss  in  the 
simplest  operations  of  business,  and  business  tact  is 
required  even  in  the  ordinary  commercial  affairs. 
There  is  always  a  chance  for  the  play  of  business 
genius  in  marketing,  whether  the  market  be  local, 
domestic,  or  foreign.  So  pick  your  shipper  with 
care. 

LESSON  XXV 

What  can  you  say  of  the  importance  of  live  stock 
raising? 

What  ways  are  open  to  the  stock  raiser  for  mar- 
keting them? 

How  would  you  organize  a  live  stock  shipping 
association? 

What  advantages  has  a  stock  selling  association? 

What  can  you  say  of  the  value  of  poultry  products? 

What  can  you  say  of  the  process  of  shipping 
poultry? 

Where  has  selling  of  dairy,  poultry  and  meat  prod- 
ucts reached  its  highest  development? 


CHAPTER  XX 

TOBACCO  :     PEANUTS. 

No  luxury  produced  on  the  farm  is  so  generally 
used  as  tobacco.  It  can  be  kept  in  manufactured 
form  indefinitely.  Restricted  to  areas  in  certain  ir- 
regular belts,  determined  more  by  soil  than  by  climate, 
and  used  all  over  the  world,  its  price  could  be  easily 
controlled  by  the  producer  through  proper  methods 
of  distribution.  This  would  require  that  the  farmer 
own  the  tobacco  till  it  is  placed  on  sale  in  the  fin- 
ished, manufactured  form.  The  manufacturer  of  to- 
bacco might  as  well  be  the  farmer  as  an  intermediary 
trust — even  though  that  trust  be  in  a  "desolved" 
condition. 

The  tobacco  trust  has  made  a  large  percentage  of 
its  millions  by  juggling  its  stocks  on  the  stock  market. 
In  fact  most  of  our  millionaires  made  their  millions 
by  stock  manipulation  or  some  form  of  unearned  in- 
crement. By  divers  moves  of  the  dividend  features 
of  the  tobacco  trust  the  stock  of  the  company  went 
from  117  to  63,  and  then  went  kiting  to  180!  This 
kind  of  high  finance  is  so  attractive  that  ordinary 
methods  of  realizing  profits  on  a  legitimate  business 
looks  very  tame.  The  gambler  who  loses  is  no  better 
than  the  gambler  who  wins.  Morally  speaking,  the 
investor  who  jumps  at  a  chance  to  win  in  a  game  of 
price  manipulation  or  a  hurricane  of  speculation,  more 
than  honest  industry  will  produce,  is  no  better  than 


Markets   and  Rural  Economics  177 

those  who  get  his  money.  A  man  that  enters  a  scram- 
ble for  unearned  increase  and  loses,  is  just  as  much 
to  be  condemned  as  the  winner  in  the  wild  scramble. 
But  the  fact  that  the  investing  public,  lured  into  these 
stock  speculations  in  the  hope  that  they  can  make 
a  bunch  of  money  without  earning  it,  are  no  better 
than  the  schemers  who  concoct  the  schemes  and  bank 
the  accounts,  is  no  excuse  whatever  for  the  toleration 
of  such  demoralizing  practices. 

By  the  farmer  entering  the  field  and  doing  for 
himself  what  it  is  his  business  to  do — own  and  oper- 
ate his  own  manufacturing  plants  and  conducting  his 
own  marketing  system — stock  gambling  and  filching 
investors  would  be  at  an  end. 

There  are  immense  profits  in  the  tobacco  business, 
and  it  should  go  to  those  who  do  the  work  and  not 
to  commercial  buccaneers.  Personally,  I  think  it  is 
a  pity  that  it  is  used  at  all,  but  the  habit  is  so  strong 
that  its  victims  will  deny  themselves  necessities  rather 
than  deny  themselves  of  this  weed.  Governments  else- 
where recognize  that  an  easy  way  to  get  money  is  to 
tax  tobacco,  and  it  carries  an  immense  load  of  gov- 
ernment tax  both  in  America  and  in  foreign  countries. 

We  discuss  the  selling  of  tobacco  by  the  farmer 
under  uLegalized  Loyalty,"  to  which  the  reader  is 
referred. 

PEANUTS 

So  far  as  is  known,  that  part  of  the  world  with  a 
written  history — the  Eastern  half — got  along  from 
the  dawn  of  history  down  to  the  discovery  of  America 
without  corn  (Indian  maize),  Irish  potatoes,  peanuts, 
some  other  useful  vegetables,  and  a  variety  of  animals 
—and  the  luxury  tobacco.  Maize  was  already  domes- 
ticated and  immediately  came  into  use  when  Euro- 


178  Markets    and   Rural  Economics 

peans  settled  on  the  continent.  The  native  potato 
was  carried  to  various  countries  and  cultivated.  It 
flourished  so  well  in  Ireland  that  it  took  the  name  of 
Irish  potato,  in  centra-distinction  to  the  sweet  potato, 
and  is  now  (next  to  rice)  the  leading  human  food 
product  of  the  world. 

The  peanut  did  not  become  of  commercial  impor 
tance  till  about  1870.  The  present  retail  value  of  our 
peanut  crop  is  around  $15,000,000.  Its  belt  in  this 
country  is  nearly  the  same  as  that  of  cotton.  New 
uses  are  continually  being  found  for  the  peanut  and 
its  products.  In  addition  to  the  great  quantity  of 
peanuts  used  in  the  ordinary  way,  vended  in  ^c  pack- 
ets, thousands  of  bushels  are  shelled  for  use  in  the 
manufacture  of  confections  and  food  products. 

The  farmer  usually  grows  his  peanuts,  gathers  them 
and  sells  them  in  the  rough  to  the  local  buyer.  The 
extent  to  which  the  pods  must  be  cleaned  and  graded 
depends  on  the  use  to  which  they  are  to  be  put.  If 
intended  for  the  ordinary  vending  purpose  they  have 
to  be  "recleaned."  If  they  are  to  be  shelled  and  sold 
in  bulk  they  need  very  little  recleaning. 

So  long  as  speculators  assume  the  carrying  func- 
tion, do  the  preparing,  displaying,  and  distributing, 
they  will  get  the  lion's  share  of  the  profits.  The  pea- 
nut growers  should  own  their  own  recleaners,  and  do 
their  own  distributing  through  their  own  agents.  This 
can  only  be  done  through  organization. 

For  vending  purposes  the  large-podded  varieties 
are  in  greatest  demand — such  as  Virginia  Bunch  and 
Virginia  Runner.  The  Spanish — developed  in  Spain 
but  not  indigenous  there — and  the  North  Carolina  are 
used  for  this  purpose.  For  shelled  peas  the  smaller 
nuts  of  the  large-podded  stock  are  employed,  and  the 
greater  part  of  the  Spanish,  the  North  Carolina  and 


Markets    and  Rural   Economics  179 

Tennessee  Red  varieties.  A  selling  agency  for  the 
peanut  growers  of  the  United  States  would  be  worth 
big  money  to  them.  The  amount  of  each  variety  de- 
manded, and  the  use  to  which  they  are  put,  and  the 
place  of  the  demand,  should  be  ascertained  and  fur- 
nished to  the  growers  by  their  own  association.  By 
this  system  the  valuable  advice  could  be  given  those 
who  were  making  specialties  pf  some  of  the  varieties 
and  thus  avoid  over-supplying  some  and  under-supply- 
ing others.  Information  is  at  the  bottom  and  consti- 
tutes the  foundation  of  all  successful  undertakings, 
and  the  information  must  be  possessed  by  those  con- 
cerned, or  it  is  valueless  for  practical  purposes.  This 
renders  it  necessary  for  the  producer  to  have  all  the 
information  concerning  distribution  and  demand  at 
his  finger's  end  in  order  to  get  the  greatest  returns 
for  his  time,  energy  and  investment. 

LESSON  XXVI 

What  can  you  say  of  the  use  of  tobacco? 

What  determines  its  place  of  production? 

What  means  does  the  tobacco  trust  offer  for  money- 
making,  other  than  profits  on  tobacco? 

How  is  tobacco  treated  by  most  governments  of  the 
world? 

Name  some  of  the  important  agricultural  products 
that  are  indigenous  to  America. 

What  can  you  say  of  the  use  of  peanuts? 

How  are  they  handled? 

What  better  way  is  there  for  the  farmer  to  handle 
his  peanuts? 


CHAPTER  XXI 

GRAIN  :    COTTON. 
Experience  of  Farmers'  Elevators 

When  an  elevator  concern  buys  grain,  and  pays  all 
the  market  will  allow,  there  is  no  profit  left  for  the 
stockholders — therefore  no  dividend.  This  applies 
to  a  farmers'  elevator  the  same  as  to  an  old-line  ele- 
vator. The  manager  of  the  farmers'  close  corpora- 
tion realizes  that  he  must  make  good  to  the  stock- 
holders if  he  holds  his  job,  and  this  compels  him  to 
make  terms  with  the  old-line  buyers  and  not  compete 
with  them  in  buying  at  a  closer  margin  to  the  selling 
price.  This  condition  destroys  the  basic  principle  of 
cooperation.  It  places  the  farmers'  elevator  right 
where  the  others  are,  even  though  the  others  be  owned 
by  exchange  gamblers.  So  the  farmer  who  patronizes 
the  farmers'  non-cooperative  elevator  is  no  better  off, 
unless  he  is  a  heavy  stockholder,  than  he  was  before 
the  farmers  decided  to  go  into  the  elevator  business. 
A  dividend  looks  just  as  good  to  a  farmer  as  it  does 
to  a  merchant,  banker,  mine  owner,  railroad  magnate, 
or  trust  captain  of  industry. 

Scores  of  farmers'  elevators  were  built  in  the  wheat 
belt,  and  put  out  of  business  by  the  old-line  elevators, 
because  the  farmers  would  not  stand  by  their  own 
enterprise  after  they  had  put  their  money  into  it,  and 
thought  they  would  be  friends  to  themselves.  Most 


Markets    and  Rural   Economics  181 

of  these  elevators  built  or  bought  by  the  farmers  were 
called  "cooperative,"  but  they  lacked  the  vital  prin- 
ciple of  genuine  cooperation,  and  were  the  prey  of 
those  who  knew  how  to  put  them  out  of  business. 

Elevators  have  to  be  in  touch  with  the  markets. 
They  buy  wheat  from  and  sell  for  the  farmer.  When 
a  big  concern  wants  to  put  a  small  one  out  of  com- 
mission, the  big  concern  sells  cheap  if  it  is  selling,  and 
pays  high  if  it  is  buying,  in  the  territory  where  the 
small  concern  is  operating.  A  system  of  old-line  ele- 
vators will  operate  to  pay  more  for  wheat  than  a 
single  elevator  operating  independently  can  possibly 
pay  and  make  expenses.  The  price  of  wheat  is  raised 
at  the  point  where  the  new  competitor  opens  up,  and 
the  price  is  lowered  a  fraction  at  a  dozen  or  more 
other  places  where  there  is  no  competition,  to  make 
up  for  the  loss  sustained'by  over-bidding  the  farmers' 
elevator.  The  farmer  bites  at  the  bait  and  sells  to 
the  old-line  company.  The  loss  of  the  commission  is 
not  the  only  damage  by  the  farmer  deserting  his  own 
elevator  and  selling  to  his  competitor.  The  farmers' 
elevator  loses  its  trade  connections  and  its  trading 
prestige  and  power,  and  the  same  loss  is  just  so  much 
gain  to  the  old-line  elevators. 

Slowly,  but  surely,  the  wheat  raisers  are  learning  by 
bitter  experience  the  folly  of  this  method  of  trying 
to  build  UD  their  own  marketing  facilities.  Many 
farmers'  elevators  are  adopting  the  real  cooperative 
plan  of  requiring  the  members  of  the  farmers'  ele- 
vator companv  to  pay  in  the  same  commissions  to  the 
elevator  on  the  wheat  sold  to  other  buyers  that  is 
charged  for  the  wheat  it  handles  for  them.  If  he  fails 
to  abide  by  the  agreement  the  value  of  the  commis- 
sions on  his  crop  of  wheat  is  taken  from  his  stock 


1 82  Markets    and  Rural  Economics 

in  the  elevator.  If  he  persists  till  all  his  stock  is 
thus  absorbed,  he  is  no  longer  a  stockholder. 

When  the  old-line  elevators  find  that  their  new 
competitor  in  a  town  is  being  operated  on  the  above 
plan  they  are  ready  to  sell  out  and  leave  the  field. 
They  know  that  they  cannot  destroy  that  kind  of  a 
rival.  The  farmers'  elevator  would  have  the  same 
profits  at  the  end  of  a  year's  business  if  it  did  not 
handle  a  single  bushel  that  it  would  if  it  handled 
every  bushel  raised  by  the  stockholders.  They  know 
it  will  be  so  next  year  and  the  next.  If  the  old-line 
elevators  pay  more  than  the  market  will  justify,  the 
builders  of  the  Cooperative  Farmers'  Elevators  sell 
their  wheat  to  them  and  hold  on  to  their  elevator 
as  a  means  of  self-defense,  while  the  war  is  on,  and 
proceed  to  do  business  when  the  battle  is  over.  This 
kind  of  cooperation  is  built  upon  a  rock,  and  when 
the  rains  beat  and  the  storms  rage,  it  stands  majestic 
and  steadfast  through  it  all. 

The  speculative  spirit  and  the  cooperative  spirit 
are  antagonistic  and  cannot  work  together.  A  co- 
operative enterprise  is  not  a  profit-making  concern, 
but  it  is  a  loss-saving  institution.  This  fundamental 
fact  must  be  realized  and  appreciated  in  order  to 
develop  militant  cooperation.  The  one  great  task 
is  to  get  people  to  see  that  it  is  more  profitable  in 
the  long  run  to  save  losses  than  to  get  dividend  checks 
from  one's  self — or  pay  to  others.  Anybody  can  see 
a  dividend  check,  but  it  takes  business  perception  to 
see  a  loss  that  is  saved. 


Markets    and   Rural   Economics  183 

THE  COTTON  RAISER  AND  COOPERATION 

A  Farmers'  Warehouse  is  Not  Necessarily  a  Co- 
operative Warehouse.  What  Real  Cooperation 
Means. 

Perhaps  as  great  efforts  have  been  put  forth  co- 
operatively to  market  cotton  as  any  farm  product; 
but  the  efforts  have  been  desultory.  There  has  been 
no  general  plan  carried  out,  and  a  basis  for  perma- 
nent success  established,  under  a  comprehensive  sys- 
tem of  genuine  cooperation.  It  is  astonishing  how 
many  can  be  bribed  to  patronize  old  channels  of 
trade,  owned  and  operated  by  parasites,  just  for  a 
pitiful  temporary  gain,  offered  for  the  purpose  of 
disreputing  any  new  venture,  and  refuse  to  patronize 
a  system  owned,  operated  and  controlled  by  them- 
selves. 

There  are  about  1,600  warehouses  in  the  South 
owned  and  operated  by  farmers.  Most  of  them  are 
owned  by  individual  corporations,  organized  for  the 
purpose  of  building  and  operating  the  warehouses. 
These  small  corporations,  ranging  from  $1000  to 
$2^,000,  are  the  property  of  stockholders  who  raise 
cotton,  and  a  few  who  do  not  raise  cotton,  but  are 
interested  in  the  handling  of  cotton  to  the  advantage 
of  the  farmer.  Many  of  these  companies  built  cheap 
structures  and  had  not  a  sufficient  volume  of  business 
to  sustain  the  enterprise,  and  have  gone  out  of  busi- 
ness. The  more  fortunate  ones,  which  were  better 
located,  better  managed  and  better  patronized,  are 
thriving. 

These  local  warehouses  do  not  buy  cotton,  as  ele- 
vators buy  wheat,  but  simply  store  it  for  the  owners 


184  Markets    and   Rural   Economics 

and  dispose  of  it  as  directed.     Some  are  run  on  the 
cooperative  plan  and  others  are  close  corporations. 

The  local  warehouses  that  do  not  divide  the  net 
profits  with  members  who  are  customers  have  no 
claims  to  be  cooperative,  but  are  close  corporations 
for  gain  only.  Some  of  them  are  earning  50  per  cent, 
for  the  stockholders. 

Who  pays  these  dividends? 

Those  who  patronize  the  warehouse  by  storing 
cotton  pay  these  dividends. 

Such  a  warehouse  company  is  skinning  its  patrons 
who  are  not  stockholders  for  the  benefit  of  the  stock- 
holders. Does  it  make  it  any  better  that  the  corpo- 
ration is  owned  by  farmers?  If  the  patrons  of  the 
warehouse  are  stockholders,  they  are  skinning  them- 
selves just  for  the  glorious  privilege  of  having  it 
handed  back  to  them  in  the  form  of  a  dividend  check. 
In  this  case,  the  large  stockholder  has  the  advantage 
of  the  small  stockholder  if  the  small  stockholder  fur- 
nishes as  much  patronage  as  the  larger  stockholder. 

The  prosperous,  non-profit  sharing,  close  corpora- 
tion warehouses  are  least  willing  to  consolidate  with 
other  warehouses.  Local  managers  do  not  want  to  be 
subordinated,  stockholders  do  not  want  to  run  the 
risk  of  having  their  dividend  checks  cut  down,  and 
suspicion  attached  to  relinquishing  local  control. 

Those  warehouses  that  have  not  been  successful 
are  willing  to  combine,  but  a  combination  of  naughts 
would  result  in  naught.  Lack  of  working  capital  is 
the  point  of  the  failure  of  most  such  enterprises. 
Where  confidence  is  lacking  capital  will  not  enter.  All 
the  warehouse  companies  went  into  business  without 
any  guarantee  whatever,  other  than  enthusiasm  and 
good  will,  that  they  would  be  patronized  and  sup- 
ported. 


Markets    and  Rural  Economics  185 

It  does  not  necessarily  follow  that  a  close  corpo- 
ration with  no  Rochdale  feature  is  unfair  to  its  cus- 
tomers. It  may  operate  on  so  close  a  margin  that 
there  would  be  no  net  profits  above  a  reasonable  in- 
terest on  the  money  invested,  to  distribute.  A  corpo- 
ration operated  on  the  cooperative  plan  might  have 
no  profits  to  distribute  to  its  customers,  and  in  this 
case  there  would  be  no  difference  in  benefits  to  the 
customer  between  the  close  corporation  and  the  co- 
operative corporation. 

Cooperation  hands  back  to  the  cooperator  every 
cent  that  his  commodity  brings  on  the  best  possible 
market,  less  the  actual  expense  incurred  in  placing 
that  commodity.  It  pays  only  a  fixed  return  on  the 
capital  stock  actually  paid  in,  just  enough  to  offset 
its  normal  earning  power  in  the  money  market.  That 
eliminates  the  profit-making  feature  which  attaches 
to  the  close  corporation,  and  individual  enterprises 
launched  solely  for  personal  gain.  No  man  or  com- 
bination cares  to  buy  up  a  cooperative  concern  as 
the  speculative  inducement  is  cut  off — this  frees  it 
from  the  grafter  and  the  domineering  capitalist.  It 
also  avoids  prosecution  under  an  anti-trust  law.  A 
truly  cooperative  concern  is  absolutely  void  of  either 
profit  or  loss — to  cooperate  is  to  operate  at  cost. 

IMPORTANCE  OF  SMALL  SAVINGS  OVERLOOKED 

Each  one  thinks  only  of  the  little  amount  it  would 
mean  to  him,  and  does  not  estimate  the  advantage 
of  throwing  so  many  more  millions  of  dollars  a  year 
into  his  part  of  the  country.  If  he  could  realize  this 
he  would  be  willing  to  abide  by  the  plans  he  has  de- 
vised to  place  his  crops  in  the  hands  of  his  own  dis- 
tributors, just  as  all  great  manufacturers  place  their 


1 86  Markets    and   Rural  Economics 

business  under  the  supervision  of  specialists,  and 
thereby  hold  the  trade  against  the  crude  methods  of 
the  past. 

The  farmer  places  too  little  stress  on  saving  a  few 
cents  a  bushel  of  grain,  a  few  cents  on  the  hundred 
pounds  of  cotton,  tobacco  or  meat.  The  cotton 
farmer  thinks  so  little  of  saving  half  a  cent  a  pound 
on  lint  cotton  that  you  cannot  interest  him  in  a  scheme 
that  promises  only  that  amount  of  saving.  Neverthe- 
less the  half  cent  a  pound  means  the  tidy  sum  of 
$30,000,000  a  year  in  the  pockets  of  the  farmers  who 
cultivate  to  one  plant  an  area  just  the  size  of  the 
State  of  Iowa.  A  saving  of  one-tenth  of  a  cent  a 
pound  would  mean  $6,000,000 — a  saving  of  only 
50  cents  a  bale. 

When  we  reverse  the  picture  it  looks  different  to 
the  business  man.  For  instance:  take  100,000  farm- 
ers selling  a  certain  article  to  speculators.  Suppose, 
by  virtue  of  a  monopoly  of  the  trade,  the  speculators 
— comparatively  few  in  number — levy  a  toll  of  one 
cent  a  day  on  the  100,000  farmers.  This  would  be 
$1,000  a  day  to  the  speculators.  By  virtue  of  the 
same  monopoly  the  speculators  also  levy  a  tribute  of 
one  cent  a  day  on  an  equal  number  of  customers;  that 
is  another  $1,000  a  day.  Now  suppose  that,  in  addi- 
tion to  this  tribute,  the  speculators,  working  systemat- 
ically, are  making  one  per  cent,  on  a  volume  of  busi- 
ness netting  $1,000  a  day.  We  thus  have  $3,000  a 
day  profit  to  the  speculators.  Now  we  have  a  pe- 
cuniary motive  actuating  the  farmer  to  run  his  own 
business  of  one  cent  a  day  and  an  actuating  motive 
of  $3,000  a  day  to  a  coterie  of  speculators  well  or- 
ganized to  maintain  this  business. 


Markets    and  Rural   Economics  187 


LESSON  XXVII 

What  can  you  say  of  the  relative  value  of  the  ordi- 
nary and  the  cooperative  elevator  in  handling  grain 
for  the  farm? 

What  is  the  usual  method  of  attack  of  close  cor- 
porations and  companies  operated  by  farmers  on  the 
same  plan? 

Wherein  is  the  cooperative  elevator  the  more  ef- 
fective system  for  the  farmer? 

What  is  the  function  of  an  elevator? 

Draw  the  line  of  distinction  between  the  specula- 
tive spirit  and  the  cooperative  spirit. 

Why  is  it  harder  for  people  to  see  and  appreciate 
a  saving  of  loss  than  for  them  to  see  and  appreciate 
a  reduction  in  cost? 

Why  is  it  that  a  reduction  in  cost  is  not  attractive 
unless  it  is  special  and  personal,  and  not  general  and 
impersonal? 

What  can  you  say  of  the  cotton  raiser  and  coopera- 
tion ? 

What  is  the  difference  in  business  methods  between 
the  elevator  and  the  warehouse? 

LESSON  XXVIII 

Why  is  it  so  hard  to  instil  into  the  minds  of  the 
average  American  the  idea  of  cooperative  distribution 
of  profits? 

Why  is  it  so  difficult  to  induce  the  owners  of  ware- 
houses to  consolidate  them? 

Are  close  corporations  necessarily  unfair  to  their 
customers? 


1 88  Markets   and  Rural  Economics 

In  what  light  is  capital  stock  viewed  from  the 
standpoint  of  cooperation? 

Why  do  capitalists  not  care  to  own  a  cooperative 
corporation? 

Is  such  a  corporation  ever  prosecuted  as  a  trust? 

Why  is  it  that  small  savings  are  overlooked? 

Does  it  make  any  difference  to  me  whether  I  help 
save  more  money  for  my  neighbor? 

When  savings  are  concentrated,  how  does  the  pic- 
ture look? 


CHAPTER  XXII 

MARKETING  PERISHABLE  PRODUCE 

A  crop  worth  $400,000,000  is  worth  considering. 
There  is  no  market  that  is  not  available  for  perish- 
ables. The  strictly  local  market  is  open  to  the  vender 
of  vegetables.  The  domestic  trade  is  largely  on  food 
stuffs,  perishables  in  varying  degrees.  By  cold  stor- 
age perishables  are  shipped  to  foreign  lands. 

The  local  market  is  usually  run  in  a  slipshod,  com- 
petitive and  wasteful  manner.  Too  much  time  is 
wasted  and  too  many  venders  divide  the  business 
till  no  one  makes  anything,  and  the  consumer  pays 
exhorbitant  prices  just  because  the  system  is  rickety, 
uneconomic,  haphazard  and  wasteful  from  the  time 
it  leaves  the  farm  till  it  reaches  the  table  of  the  con- 
sumer. A  town  of  10,000  inhabitants  is  large  enough 
to  abandon  the  old  hawking  and  peddling  system  of 
marketing  vegetables.  There  should  be  a  commissary 
department  in  the  city  government  and  a  place  laid 
off  for  a  receiving  station.  Orders  should  be  sent  in 
by  customers  a  day  ahead  and  all  goods  received,  in- 
spected and  graded.  The  inspector  should  grade  by 
number  and  not  know  whose  products  he  is  grading. 
When  sufficient  amount  is  delivered  to  fill  all  orders 
no  others  should  be  received.  These  coming  later 
should  be  notified  and  instructed  to  ship  to  some  other 
market.  This  would  have  to  be  done  by  a  representa- 
tive of  the  farms,  as  the  city  buyer  gloats  over  a 


190  Markets    and   Rural   Economics 

glutted  market.  Goods  that  will  keep  for  several 
days  could  be  treated  differently.  The  customers 
wanting  delivery  could  be  listed  and  charged  accord- 
ingly. Those  preferring  to  do  their  own  delivering 
could  be  charged  accordingly.  There  should  be  both 
a  retail  and  a  wholesale  department,  and  prices  made 
according  to  the  relative  cost  of  each. 

When  a  city  is  large  enough  to  have  shipments 
made  to  it  rather  than  depend  on  local  supply  the 
system  would  have  to  be  adjusted  to  meet  the  differ- 
ent conditions.  There  could  not  be  a  rule,  perhaps, 
to  stop  shipments  when  the  supply  was  full,  but  when 
the  normal  demand  was  supplied  it  could  be  required 
of  the  department  to  furnish  regular  shippers  with 
the  information,  and  avoid  a  waste  by  oversupply. 

Whether  this  distributing  system  be  owned  by  the 
city  and  directed  by  a  department  or  the  city  govern- 
ment, by  a  private  company  under  supervision  of  legal 
authority,  by  a  society  of  producers,  or  a  society  of 
consumers,  it  could  serve  the  purpose  in  view.  It  is 
just  as  possible  and  as  feasible  to  incorporate  a  com- 
pany to  furnish  food  to  a  town  as  it  is  to  incorporate 
a  company  to  furnish  water  or  light  to  the  same 
people. 

Districts  which  produce  more  than  the  local  mar- 
ket can  use  should  be  organized  in  order  to  make  the 
best  arrangement  with  the  railroads,  with  commis- 
sion men,  or  place  a  representative  in  the  large  mar- 
ket to  which  most  shipments  are  to  go,  and  have  him 
do  the  distributing  just  as  commission  men  do.  The 
manager  of  the  local  shipping  society  must  understand 
markets  and  marketing;  he  must  study  consumers  and 
know  their  demands;  he  must  know  how  to  attract 
customers  by  displays,  and  by  throwing  a  personality 
into  his  business;  he  must  keep  up  with  the  current 


Markets    and  Rural   Economics  191 

movement  of  those  products  he  is  handling,  and  the 
substitutes  for  same;  he  must  understand  the  storage 
business,  the  transportation  problems,  and  the  com- 
mission business.  And  the  most  of  this  must  be 
learned  by  actual  experience.  The  theory  is  a  splen- 
did help  to  one  entering  the  practical  part  of  the 
work,  but  it  will  not  suffice.  But  the  theory  may  be 
understood,  and  the  practice  may  be  sufficient  to  fa- 
miliarize one  with  the  details,  and  yet  it  is  quite  pos- 
sible to  make  a  failure — because  the  man  has  no 
knack  at  handling  folks. 

EXAMPLE  OF  SUCCESS 

Nothing  seems  to  teach  so  impressively  as  a  work- 
ing object  lesson.  We  will  take  the  Eastern  Shore  of 
Virginia  Produce  Exchange  as  an  example  of  a  suc- 
cessful farmers'  produce  exchange.  This  exchange 
was  organized  in  1899.  It  had  in  1913  a  business  of 
$4,000,000.  It  ships  potatoes,  sweet  and  Irish,  cab- 
bage, onions,  and  other  vegetables.  Products  are  sold 
f.  o.  b.  shipping  point,  on  quotation  furnished  by  wire. 

The  exchange  is  made  up  of  thirty-three  local  asso- 
ciations with  as  many  directors.  The  head  office  and 
the  local  shipping  points  are  in  close  touch  by  wire. 
The  general  manager  is  charged  with  the  duty  of 
handling  all  the  produce  placed  in  the  custody  of  the 
exchange,  whether  for  consignment,  storage  or  sale, 
and  he  is  empowered  to  buy,  sell,  consign,  or  store 
any  product  left  with  him.  He  is  required  to  advise 
local  agents  as  to  whom  they  are  to  consign  to,  and 
to  notify  them  of  the  prices  at  which  goods  were  sold 
at  each  station  for  the  previous  day.  The  general 
manager  has  power  at  any  time  to  investigate  the 
work  of  local  inspectors,  and  to  suspend  for  derelic- 


192  Markets    and   Rural   Economics 

tion  of  duty.  The  general  inspector  is  required  to 
visit  each  local  inspector  once  a  month. 

This  organization  has  proved  itself  capable  of 
handling  those  who  will  not  join,  or  cannot  become 
members  for  any  reason.  For  the  non-member  the 
exchange  agrees  to  ship,  by  making  a  flat  charge  of 
one  dollar  for  a  ushipping  privilege."  Tenants  are 
allowed  to  ship  if  the  landlord  is  a  member  of  the 
association.  The  negro  is  not  admitted  to  member- 
ship, but  his  stuff  is  handled  as  a  non-member. 

Any  farmer  may  become  a  member  by  buying  one 
share  of  stock.  No  one  can  hold  more  than  ten  per 
cent,  of  the  capital.  At  present  the  capital  stock  is 
$50,000,  divided  into  $5.00  shares. 

If  two  thousand  organized  truck  growers  can  do 
these  things  others  can  do  likewise.  Suppose  all  sim- 
ilar organizations  in  the  country  would  get  together 
and  form  a  National  Clearing  House  having  general 
supervision  over  all  truck  products,  could  it  not  more 
systematically  distribute  the  crops  than  is  now  done? 
There  are  only  three  thousand  counties  in  the  coun- 
try, and  less  than  half  that  number  have  this  char- 
acter of  crops  to  market  any  one  day.  With  a  Na- 
tional Clearing  House  telegrams  could  be  sent  every 
day  from  all  local  associations  to  district  associations 
and  from  district  associations  to  the  National  Clear- 
ing House,  and  thereby  all  necessary  information  as 
to  supply  and  demand  would  be  at  the  finger's  end; 
and  from  the  central  clearing  house  the  current  move- 
ments could  be  directed. 

"Big  scheme?"  Sure,  and  so  were  the  oil  trust, 
steel  trust,  meat  trust,  tobacco  trust,  etc.,  big  schemes 
which  worked. 

The  longer  we  postpone  adopting  a  more  econom- 


Markets   and  Rural   Economics  193 

ical  method  of  distribution  the  longer  will  we  carry 
the  burden  of  wasteful  methods. 

LESSON  XXIX 

Name  some  perishable  products. 

Name  some  very  perishable  products. 

Name  some  that  are  quasi-perishable. 

Do  you  know  of  any  products  that  are  altogether 
non-perishable  ? 

What  can  you  say  of  the  value  of  those  products 
classed  as  perishable? 

What  would  be  your  idea  of  a  commissary  depart- 
ment in  a  city  government? 

What  qualifications  do  you  think  a  manager  of  a 
shipping  society  should  have? 

Give  an  example  of  a  successful  shipping  society. 

What  are  the  duties  of  the  general  manager? 

How  does  this  company  handle  the  crops  of  those 
who  will  not  join  or  are  not  eligible? 

How  could  a  National  Clearing  House  be  estab- 
lished? 

Do  you  think  such  clearing  house  should  be  estab- 
lished? If  so,  why?  If  not,  why? 


CHAPTER  XXIII 

A    DIVISION    OF    MARKETS    OPERATED    BY    THE 
NATIONAL  GOVERNMENT 

The  economics  of  distribution  concern  every  citi- 
zen. To  ascertain  the  statistical  facts  connected  with 
distribution  and  disseminate  them  often  enough  to 
be  of  service  to  the  people  would  certainly  not  be 
overreaching  the  proper  functions  of  government. 

"Packers  have  so  firm  a  grip  on  retail  meat  dealers 
that  the  retailers  fear  to  buy  beef  raised  by  farmers. 
The  question  will  be  how  the  small  raiser  can  market 
his  stock  at  a  fair  price.  Dealers  will  not  buy  home- 
grown beef  through  fear  that  packers  will  later  refuse 
them  a  supply." 

This  was  the  statement  made  by  a  New  York 
farmer  in  answer  to  an  appeal  before  the  State  Agri- 
cultural Society  for  the  small  farmer  to  raise  beef 
for  the  market. 

Where  there  is  no  municipal  market  there  is  usually 
a  tariff  wall  imposed  against  the  farmer  in  the  form 
of  a  huckster's  license  which  keeps  the  farmer  from 
selling  to  the  consumer.  This  was  the  situation  in 
Los  Angeles  in  1913  when  the  city  decided  on  es- 
tablishing a  municipal  market  where  the  farmer  could 
bring  his  produce  without  this  huckster's  tax.  The 
municipal  market  is  quite  a  convenience  to  hotels, 
boarding-house  keepers,  and  those  who  live  close  to 
the  market.  There  are  those  who  live  at  a  distance 
and  must  have  their  truck  delivered,  which  compels 
them  to  pay  more  than  others,  as  the  delivery  charges 
must  be  added.  If  the  farmers  were  allowed  to  ped- 
dle from  house  to  house  this  charge  would  also  have 


Markets   and  Rural   Economics  195 

to  be  paid,  as  the  farmers'  time  is  worth  as  much  to 
him  as  that  of  the  deliveryman  who  serves  the  mar- 
ket-house. The  women  do  the  marketing  and  the 
average  housewife  can't  go  to  market  every  morning. 
The  duties  of  the  household  make  it  impossible — 
getting  breakfast,  starting  the  children  to  school — 
perhaps  there  are  little  children  that  she  cannot  leave 
— so  she  orders  by  phone  and  has  the  order  delivered. 
There  seems  to  be  no  remedy  for  this.  For  the 
farmers  to  do  their  own  delivering  would  fill  the 
streets  every  morning  with  competitive  venders  who 
would  sell  at  all  kinds  of  prices,  and  losing  time 
and  selling  out  at  any  price  to  get  away.  This  would 
often  be  to  the  advantage  of  the  city  buyer,  but  it 
would  not  in  the  long  run  as  there  would  not  be  the 
steadiness  of  supply  that  the  city  market  furnishes. 

Cincinnati  had  a  Housewives'  Cooperative  League 
composed  of  several  hundred  housewives  who  pur- 
chased in  car-lots  staple  products  direct  from  or- 
ganized producers  who  can  furnish  in  car  shipments. 
Other  articles  were  purchased  in  case-lots.  Their 
credit  was  good  and  they  are  circumventing  much  of 
the  ordinary  waste  in  city  distribution.  It  failed  for 
lack  of  proper  connection  with  organized  growers. 

There 'are  certain  facts  which  the  producing  and 
consuming  public  need  to  know  and  which  cannot  be 
secured,  tabulated  and  published  as  timely  informa- 
tion without  considerable  cost.  When  it  is  collected 
by  private  parties  or  concerns  it  is  for  private  use, 
and  against  the  interest  of  those  who  do  not  possess 
the  information.  The  only  way  the  entire  public  can 
profit  by  this  information  is  for  it  to  be  secured  and 
given  out  by  the  government  itself.  On  this  informa- 
tion the  producer  and  consumer  can  establish  a  sys- 
tem of  distribution  that  will  save  millions  every  year. 


196  Markets    and  Rural   Economics 

What  is  needed  is  exact  information  concerning  the 
production  and  consumption  of  farm  products  and 
the  market  value  of  same  in  every  available  market — 
furnished  every  day  by  the  government — like  weather 
reports. 

American  farm  products  for  1912  reached  the 
colossal  amount  of  $13,000,000,000.  Of  this 
amount  the  railroads  received  $495,000,000,  or  3.8 
per  cent.;  the  legitimate  expense  of  selling  was  $i,- 
200,000,000,  or  9.2  per  cent.;  the  waste  in  selling 

was  $1,560,000,000,  or  12  per  cent.;  dealers'  and  re- 
tailers' profits,  $3,745,000,000,  or  28.9  per  cent.;  the 
amount  received  by  those  who  produced  this,  who 
toiled  and  labored  that  it  might  be  given  to  the  world, 
received  $6,000,000,000,  or  46.1  per  cent. 

The  International  Institute  of  Agriculture,  sup- 
ported by  the  nations  of  the  world,  with  habitat  at 
Rome,  has  begun  publishing  its  summaries  of  the 
world's  crops — furnishing  a  balance  wheel  to  the 
markets  of  every  zone. 

These  reports  need  to  be  supplemented  by  the 
market  reports  and  furnished  to  producers  and  con- 
sumers. Also  such  other  details  as  to  probable  de- 
mand and  the  probable  supply  as  would  be  of  service 
to  any  concerned. 

We  have  reports  galore  now,  but  not  the  service 
that  is  needed.  The  exchanges  are  operated  by  those 
whose  interest  it  is  to  keep  both  the  producer  and 
consumer  ignorant  of  the  real  conditions.  Those 
articles  of  commerce  handled- without  exchange  are 
marketed  at  a  disadvantage  by  the  producer  and 
bought  at  a  disadvantage  by  the  consumer.  Unless 
controlled  by  a  trust,  the  prices  are  the  caprice  of 
chance  without  a  thorough  knowledge  of  the  avail- 
able markets.  The  producers  of  truck-farm  products 


Markets   and  Rural   Economics  197 

have  no  way  of  knowing  the  markets  without  each 
spending  more  for  the  information  than  he  can  af- 
ford to  pay.  The  present  haphazard  and  expensive 
method  of  distributing  the  world's  supply  to  the 
world's  consumers  is  a  travesty  on  the  business  sense 
of  the  age.  It  should  be  reduced  to  a  perfect  system 
like  the  commissary  department  of  an  army  and  oper- 
and operated  for  the  benefit  of  all  the  people.  To 
hide  the  facts  concerning  production  or  consumption 
is  an  economic  crime. 

The  high  cost  of  living  has  become  world-wide  and 
brought  on  in  an  intensified  form  the  old  prejudice 
against  middlemen.  Segregation  of  business  depart- 
ments is  the  only  process  that  will  solve  the  question 
of  commercial  intermediaries. 

On  the  question  of  the  distribution  of  labor,  Ger- 
many, England,  and  several  States  of  the  Union  have 
taken  advanced  steps.  If  the  demand  and  supply  of 
labor  is  a  subject  for  government  to  concern  itself 
about  for  the  benefit  of  society,  it  is  equally  the  duty 
of  the  government  to  furnish  like  information  con- 
cerning the  supply  and  demand  of  the  products  of 
labor. 

Germany  has  in  operation  a  system  by  which  a 
laborer  anywhere  in  the  German  empire  can  secure 
information  that  will  get  him  employment  in  any 
other  part  of  the  Fatherland.  Those  who  need  labor- 
ers can  readily  secure  them  if  they  are  available  in 
United  Germany. 

England  has  just  inaugurated  a  similar  system,  and 
has  already  secured  employment  for  .thousands  of 
people  under  its  operation.  Lockouts,  strikes  and 
labor  riots,  with  the  drafts  on  charity  incident  to 
such,  have  been  mitigated  since  the  introduction  of 


198  Markets    and   Rural   Economics 

this  remedial  and  progressive  means  of  matching  con- 
ditions in  a  broad  and  liberal  spirit. 

The  State  of  New  York  put  into  operation  an  em- 
ployment system  as  radical  as  it  is  new.  Through 
eight  main  offices,  each  with  various  branches,  a  state- 
wide effort  will  be  made  to  secure  information  as  to 
the  localities  and  industries  where  workers  are  needed, 
and  effect  a  prompt  and  efficient  distribution  of  labor. 

California  has  passed  a  law  which  provides  that 
the  head  of  a  family,  failing  to  provide,  shall  be  put 
to  work  on  the  highways  at  $1.50  a  day. 

Wisconsin  has  this  problem  under  its  Industrial 
Commission  and  has  a  good  record  to  its  credit. 

Large  employers  of  labor  who  were  skeptical  re- 
garding the  possibilities  of  the  department  have  been 
converted;  now,  when  they  need  expert  millwrights, 
machine  hands  or  common  laborers,  they  telephone 
the  free,  employment  office,  and  before  the  close  of 
the  same  day  their  needs  usually  are  filled.  Farmers 
are  using  the  free  employment  office  in  obtaining  farm 
help,  and  the  Commission  at  this  time  is  attempting  to 
perfect  a  system  by  which  country  bankers  will  act 
as  agents  between  farmers  seeking  help  and  the  vari- 
ous free  employment  offices. 

As  to  the  actual  accomplishments  of  the  free  em- 
ployment offices,  the  year's  statistics  give  a  faithful 
story,  from  July  i,  1911,  to  June  30,  1912,  the  free 
employment  offices  in  Milwaukee,  Superior,  La 
Crosse,  and  Oshkosh  received  16,916  applications 
for  work.  These  offices  referred  16,182  persons  to 
positions.  In  this  same  period  17,329  applications 
for  help  were  made  by  the  employers.  If  the  aver- 
age of  increase  in  this  branch  of  the  Commission's 
work  is  maintained  in  the  next  two  or  three  years, 


Markets    and  Rural   Economics  199 

the  results  will  be  of  stupendous  importance  to  Wis- 
consin industry  and  to  the  welfare  of  the  working 
classes.  The  actual  money  saving  will  be  large,  for 
the  reason  that  men  out  of  work,  instead  of  spending 
days  and  even  weeks  visiting  dozens  of  factories  in 
search  of  work,  will  go  straight  to  the  free  employ- 
ment office  where  they  will  find  all  positions  bulle- 
tined. 

In  dealing  with  the  distribution  of  the  products 
of  labor,  less  progress  has  been  made;  the  obvious 
reason  being  that  a  product  does  not  raise  a  disturb- 
ance when  neglected  and  not  used,  while  an  individual 
does.  It  was  the  high  cost  of  living  that  has  forced 
to  the  front  for  serious  consideration  the  subject  of 
the  distribution  of  the  products  of  labor — especially 
food  products.  Certain  municipalities  have  made 
practical  attempts  to  mitigate  the  evils  of  our  present 
unsystematical  and  wasteful  methods. 

The  State  of  New  York  appointed  a  Committee 
on  Markets,  Prices  and  Costs,  being  a  subdivision  of 
the  State  Food  Investigating  Commission.  It  made 
its  report  in  August,  1912,  with  recommendations  for 
legislative  action.  The  committee  found  that  the 
marketing  agencies  oi  Greater  New  York  are  cov- 
ered by  thirteen  classes  of  food  distributors,  ranging 
from  the  municipal  wholesale  markets,  the  wholesale 
markets  conducted  by  railroads  and  steamship  lines, 
and  the  farmers'  markets,  to  the  corner  grocery  and 
pushcart  types  through  the  intermediate  grades  or 
stores.  The  committee  reached  the  conclusion  that 
the  large  retail  unit  of  food  department  store  buying 
direct,  receiving  direct,  and  selling  direct,  is  the  best 
economic  type  in  point  of  efficiency,  minimum  of 
waste,  satisfactory  distribution  and  due  rewards  for 
management  and  capital. 

The  Committee  recommended  that  the  charters  of 


2OO  Markets    and  Rural   Economics 

the  various  cities  of  the  State  be  amended  so  as  to 
provide  for  a  Department  of  Markets,  charged  with 
the  economic  and  sanitary  supervision  of  food  sup- 
plies used  in  the  municipalities.  It  should  also  be 
charged  with  the  duty  of  publishing  accurate  state- 
ments of  market  needs  and  prices,  to  be  sent  to  pro- 
ducers of  food  supplies,  so  that  they  can  be  protected 
from  extortion  and  offered  facilities  for  marketing. 
The  committee  estimated  that  the  annual  food  supply 
of  Greater  New  York  cost  at  the  transportation  ter- 
minals $350,000,000,  and  that  it  cost  the  consumers 
$500,000,000.  The  committee  estimated  that  the 
suggested  substitution  of  large  unit  stores  capable  of 
supplying  twenty-five  to  fifty  thousand  people,  and 
each  with  adequate  storage  facilities,  would  bring 
about  a  system  of  food  distribution  at  a  cost  of  15 
per  cent,  for  the  separate  wholesale  and  retail  sys- 
tems without  delivery  and  35  to  40  per  cent,  with 
delivery. 

This  would  result  in  a  saving  to  New  York  City 
alone  of  $60,000,000  a  year,  or  12  per  cent,  of  the 
present  retail  price.  This  committee's  estimates,  we 
take  it,  were  approximately  correct,  and  show  some- 
thing of  the  immensity  of  the  task  and  the  savings 
involved  in  reducing  distribution  to  a  scientific  basis. 
Well  administered  terminal  markets  exist  in  almost 
every  European  city. 

Municipal  markets  are  in  operation  in  several  cities 
and  have  not  been  abandoned  after  being  tried.  The 
city  of  Dubuque,  Iowa,  has  a  municipal  market  which 
gives  the  producers  more  and  enables  the  city  buyers 
to  get  their  produce  cheaper,  than  in  other  cities  of 
equal  natural  advantages. 

Des  Moines  has  taken  a  hand  in  delving  into  this 
field  of  investigation  with  good  results.  Indianapolis, 


Markets   and   Rural   Economics  201 

Indiana,  has  treated  the  country  to  an  object  lesson 
in  an  emergency. 

The  Farmers'  Educational  and  Cooperative  Union 
of  America  was  organized  in  1902,  and  rapidly 
spread  over  half  the  States  of  the  Union.  Its  mem- 
bership was  confined  to  farmers,  but  soon  crossed 
the  million  mark  in  its  initiations.  In  its  constitution 
and  by-laws  it  sets  forth  the  following  Preamble  and 
Declaration  of  Purposes: 

"In  the  course  of  modern  industrial  development 
we  find  it  necessary  that  the  farmer  not  only  apply 
the  principles  of  scientific  agriculture,  but  that  he  sys- 
tematize his  business  by  cooperation  and  apply  the 
principles  of  scientific  commerce. 

"Expensive  and  wasteful  methods  of  exchange 
have  been  a  constant  drain  on  the  farming  class,  and 
speculation  has  been  allowed  to  demoralize  markets 
and  prevent  the  normal  operation  of  the  law  of  sup- 
ply and  demand. 

uTo  enable  farmers  to  meet  these  conditions  and 
protect  their  interests  we  have  organized  the  Farmers1 
Educational  and  Cooperative  Union  of  America,  and 
declare  the  following  purposes : 

uTo  secure  equity,  establish  justice,  and  apply  the 
Golden  Rule. 

uTo  discourage  the  credit  and  mortgage  system. 

uTo  assist  our  members  in  buying  and  selling. 

"To  educate  the  agricultural  classes  in  scientific 
farming. 

"To  teach  farmers  the  classification  of  crops,  do- 
mestic economy  and  the  process  of  marketing. 

"To  systematize  methods  of  production  and  dis- 
tribution. 

"To  eliminate  gambling  farm  products  by  boards 


2O2  Markets    and   Rural   Economics 

of  trades,  cotton  exchanges,  and  other  speculators. 

"To  bring  farming  up  to  the  standard  of  other  in- 
dustrial and  business  enterprises. 

uTo  secure  and  maintain  profitable  and  uniform 
prices  for  cotton,  grain,  live  stock,  and  other  prod- 
ucts of  the  farm. 

uTo  strive  for  harmony  and  good  will  among  all 
mankind,  and  brotherly  love  among  ourselves. 

uTo  garner  the  tears  of  the  distressed,  the  blood 
of  the  martyrs,  the  laugh  of  innocent  childhood,  the 
sweat  of  honest  labor,  and  the  virtue  of  a  happy 
home  as  the  brightest  jewels  known. " 

This  Farmers'  Union  is  a  non-partisan  organiza- 
tion, but  does  not  eschew  the  discussion  of  public 
questions. 

In  connection  with  its  non-partisan  attitude  in  pol- 
itics it  never  allows  its  officials  to  hold  political  office; 
it  never  indorses  a  candidate;  it  never  puts  out  a  can- 
didate; it  never  formulates  a  "political  platform";  it 
agrees  in  conventions  on  a  few  measures,  elects  a 
legislative  committee  which  goes  to  the  State  Legis- 
lature, if  a  state  committee,  and  to  Congress  if  a 
national  committee,  and  this  committee  argues  the 
case  before  the  committee  having  charge  of  the  bill 
pending  passage. 

This  organization  has  worked  more  persistently 
for  a  better  system  of  marketing  among  the  farmers 
than  any  other  organization  in  the  country.  It  has 
done  more  effective  work  along  legislative  lines  for 
the  farmers  than  any  other  organization.  Pursuing 
this  question  of  governmental  aid  in  solving  the  prob- 
lem of  distribution  it  sent  a  Legislative  Committee  to 
Washington,  D.  C.,  in  the  winter  of  1912,  and  the 
members  of  the  committee  went  in  and  out  among 
the  members  of  both  the  Senate  and  House,  present- 


Markets    and   Rural   Economics  203 

ing  the  proposition  of  establishing  a  Bureau  of  Mar- 
kets to  collect  and  distribute  to  the  people  the  infor- 
mation that  is  needed.  The  Congressmen  and  Sen- 
ators would  respectfully  listen  and  say  uYou  know 
what  you  want — draw  your  bill."  One  Senator  from 
the  South  said  that  if  the  farmers  wanted  something 
that  would  do  them  no  harm  and  didn't  cost  too  much 
he  was  willing  for  them  to  have  it,  but  plainly  indi- 
cated that  he  did  not  think  there  was  anything  in 
the  proposition.  However,  he  promised  to  ulook 
into  it." 

The  writer  of  these  words  and  the  national  secre- 
tary of  the  Farmers'  Union  drafted  a  bill.  By  re- 
quest it  was  introduced  in  the  House  by  Messrs.  Cal- 
loway  of  Texas  and  Webb  of  North  Carolina.  They 
let  it  die.  It  was  introduced  in  the  Senate  by  Senator 
Hoke  Smith  of  Georgia  and  he  pushed  to  passage. 
When  it  got  before  the  Agricultural  Committee  of 
the  House  Mr.  Lever  of  South  Carolina  was  chair- 
man. He  had  a  vocational  education  bill  before  the 
Senate  which  had  passed  the  house.  Senator  Page 
had  a  somewhat  similar  bill  before  the  House  which 
had  passed  the  Senate.  Members  of  the  "third  house" 
say  that  Mr.  Lever  hinted  to  Senator  Smith  that  if 
the  Lever  bill  got  through  the  Senate  the  Smith  bill 
would  get  through  the  House,  otherwise  not.  The 
Lever  bill  failed.  The  Smith  bill  was  side-tracked 
for  a  line  in  the  appropriation  bill  putting  at  the  dis- 
posal of  the  Secretary  of  Agriculture  $^o,ooo  to  ex- 
periment with  the  project.  Such  are  the  ways  of  poli- 
ticians. I  mention  these  things  to  show  some  of  the 
devious  ways  of  legislation,  and  how  personalities 
and  jealousies  enter  into  grave  problems  of  statecraft. 

Nothing  short  of  eternal  vigilance,  backed  by  in- 
telligence and  unimpeachable  integrity,  will  stand  the 


204  Markets    and  Rural   Economics 

test  in  demanding  measures  of  broad  statesmanship. 
Without  a  high  degree  of  political  wisdom  among 
the  masses,  free  institutions  and  representative  gov- 
ernment cannot  permanently  survive. 

The  bill  provided:  uThat  the  Chief  of  the  Bureau 
of  Statistics  shall  have  power  and  authority  to  make, 
through  the  said  Division  of  Markets,  under  the  di- 
rection of  the  Secretary  of  Agriculture,  investigation 
as  to  the  systems  of  marketing  farm  products,  co- 
operative or  otherwise,  in  practice  in  various  sections 
of  the  United  States  and  in  foreign  countries,  and 
shall  collect  data  in  reference  thereto.  The  informa- 
tion and  data  thus  collected  shall  be  distributed  to 
farmers,  farmers'  organizations,  and  societies  of  con- 
sumers throughout  the  various  agricultural  sections  of 
the  country,  and  made  available  for  the  use  of  any 
individual  or  organization,  either  by  the  circulation 
of  printed  bulletins  and  telegrams,  or  by  information 
given  personally  by  special  agents  of  said  bureau.  It 
shall  also  be  the  duty  of  said  Chief  of  the  Bureau 
of  Statistics  to  make  through  the  said  Division  of 
Markets,  under  the  direction  of  the  Secretary  of  Agri- 
culture, investigation  of  demands  for  farm  products 
in  various  trade  centers,  and  the  current  movement 
of  such  products,  giving  specific  data  as  to  the  supply, 
normal  demand,  and  price  thereof,  with  the  view  of 
furnishing  information  as  to  the  best  available  mar- 
kets, which  information  shall  be  distributed  under 
the  direction  of  the  Secretary  of  Agriculture. " 

It  also  provided: 

"That  it  shall  be  the  duty  of  the  Chief  of  the 
Bureau  of  Statistics  to  collect,  through  the  said  Di- 
vision of  Markets,  by  any  expeditious  method,  as 
by  telegraph,  telephone,  mail,  or  otherwise,  compile 
and  report  to  farmers,  farmers'  organizations,  and 


Markets    and   Rural   Economics  205 

societies  of  consumers,  daily  bulletins  or  telegraphic 
reports  of  such  information  and  statistics  as  will  en- 
able them  to  adopt  plans  of  marketing  that  may  fa- 
cilitate the  handling  of  farm  products  at  a  minimum 
cost: 

"Provided,  That  when  such  reports  or  statistics 
are  requested  to  be  furnished  by  telegraph  or  tele- 
phone, or  methods  other  than  the  United  States  mail, 
the  person  or  association  making  such  request  must 
advance  the  fee  for  the  cost  of  transmission,  which 
shall  be  deposited  to  the  appropriation  for  the  main- 
tenance of  the  said  Division  or  Markets.  It  shall  be 
the  duty  of  the  Secretary  of  Agriculture  to  make  an 
annual  report  to  Congress  regarding  the  work  of  the 
said  Division  of  Markets,  with  any  recommendations 
that  may  enable  Congress  to  enact  any  additional  nec- 
essary legislation." 

And  to  inaugurate  the  experiment : 

uThat  the  Secretary  of  Agriculture  shall  make  all 
necessary  arrangements  for  offices  and  supplies  for 
the  use  of  said  Division  of  Markets,  including  office 
equipment,  rent  in  or  out  of  the  District  of  Columbia, 
stationery,  telegraphing,  and  all  other  necessary  ex- 
penses. The  compensation  of  clerks  and  employees 
not  otherwise  specifically  provided  for  in  this  act  shall 
be  fixed  by  the  Secretary  of  Agriculture,  subject  to 
the  restrictions  of  existing  law. 

"That  the  sum  of  $50,000,  or  so  much  thereof  as 
may  be  necessary,  is  hereby  appropriated  for  the  ex- 
penses of  such  division,  to  be  available  during  the 
fiscal  year  ending  June  30,  1913." 

The  bill  was  submitted  to  the  Secretary  of  Com- 
merce and  Labor  for  his  opinion,  and  he  said  that 
his  department  could  undertake  the  work  and  that 
it  could  be  developed,  but  he  declined  to  pass  judg- 


206  Markets    and  Rural   Economics 

ment  as  to  its  advisability  or  estimate  its  probable 
cost. 

The  Secretary  of  Agriculture  gave  it  his  unqualified 
endorsement. 

There  is  no  way  at  present  for  the  general  public 
to  know  of  the  current  movement  of  crops,  the  supply 
on  hand,  where  it  is  located,  the  normal  demand  at 
the  centers  of  distribution  and  consumption,  and  the 
shipments  on  the  way  to  a  given  place.  The  only 
ones  who  know  these  things  are  those  who  maintain 
the  big  exchanges  where  grain,  cotton,  etc.,  contracts 
are  handled  in  immense  quantities.  They  pay  for 
their  information  and  charge  it  up  to  the  business  and 
the  consumer  pays  for  it.  When  independent  firms 
undertake  to  keep  up  these  statistics  day  by  day — 
which  must  be  done  to  be  of  value  to  the  shipper  of 
perishables — the  expense  is  so  great  that  it  takes  an 
association  that  has  a  practical  monopoly  before  it 
can  afford  to  adopt  the  most  economic  methods  of 
distribution  of  perishables  that  must  be  sold  at  other 
than  local  markets. 

A  successful  shipping  exchange  manager  should 
know  how  much  of  the  articles  he  is  handling  could 
be  shipped  from  day  to  day,  how  many  cars  would 
be  needed,  what  the  freight  rates  would  be  to  the 
different  points,  how  many  cars  of  a  given  article  the 
people  in  the  different  cities  would  use  from  day  to 
day,  the  outside  competition  that  would  have  to  be 
met,  and  what  prices  should  be  expected. 

Organizations  have  been  formed  in  various  sections 
to  handle  specific  commodities,  with  a  routing  agent 
to  whom  all  shipments  are  referred,  and  he  has  charge 
of  the  routing  of  cars  to  their  destination.  He  keeps 
in  touch  with  all  available  markets,  and  routes  the 
cars  to  the  most  promising  market.  Sometimes  these 


Markets    and   Rural   Economics  207 

agents  of  associations,  representing  associations  wide- 
ly separated  and  handling  competitive  products,  have 
an  understanding  so  as  to  avoid  competing  as  much 
as  possible.  These  associations  are  very  serviceable 
to  communities  where  shipments  are  of  sufficient  vol- 
ume to  pay  to  sustain  the  necessary  expense. 

By  keeping  in  hourly  touch  with  markets,  and  by 
keeping  track  of  his  cars,  a  routing  agent  can  change 
the  course  of  a  car  several  times  before  it  reaches  its 
destination  if  the  market  demands  it.  Some  rail- 
roads accommodate  smaller  shippers  by  a  "pick-up" 
system,  whereby  all  less-than-carload  lots  are  collected 
at  various  stations  and  combined  at  transfer  points  in 
full  carloads.  Canton,  Mississippi,  and  Norfolk,  Vir- 
ginia, are  examples  of  this  system. 

Another  innovation  introduced  by  some  roads  to 
facilitate  the  proper  shipping  of  perishables  is  the 
telegraphic  "passing"  reports  made  as  a  car  passes 
a  station  on  its  route.  It  has  been  used  by  the  cars 
being  reported  by  telegraph  on  passing  certain  points, 
and  their  movement  was  recorded  in  the  central  office 
in  writing  and  by  some  visible  sign.  Each  car  was 
represented  by  a  peg  bearing  the  symbol  of  the  car 
and  inserted  in  a  block  which  represented  the  train. 
The  route  over  which  the  cars  moved  was  represented 
by  a  board  on  which  vertical  lines  and  spaces  indicated 
the  various  stations  from  which  "passing"  reports 
were  made.  When  a  train  was  reported  to  have 
passed  a  station,  the  block  representing  the  train  was 
moved  past  the  place  on  the  board  representing  the 
station.  The  telegraphic  reports  mentioned  each  car 
in  the  train;  cars  non-mentioned  were  accounted  for, 
with  the  reason  for  delay,  or  were  the  subject  of 
prompt  inquiry  from  the  central  office. 

Any  shipping  concern  organized  by  farmers  or  any 


208  Markets    and   Rural   Economics 

organization  of  consumers  could  utilize  these  reports 
in  directing  the  shipment  of  cars  from  the  point  of 
production  to  the  point  of  consumption.  The  need 
for  information  of  this  character  has  led  large  ship- 
pers to  adopt  a  system  of  their  own  by  which  they 
trace  the  movement  of  cars  in  transit  in  order  to  dis- 
tribute them  among  the  different  markets  to  the  best 
advantage.  A  number  of  organizations  of  farmers 
have  adopted  a  plan  of  this  kind.  When  a  shipment 
is  started,  the  bill  of  lading  is  turnexd  over  to  the  man- 
ager of  the  organization,  whose  business  it  is  to  di- 
rect the  shipment  of  the  car  to  the  best  possible  ad- 
vantage. The  object  in  having  a  central  authority  to 
direct  shipments  is  to  prevent  sending  an  over-supply 
to  one  place  in  a  given  time.  On  receiving  the  bill 
of  lading,  a  record  of  the  car  is  made  on  a  card  in 
the  office  of  the  organization  and  the  card  filed  in  its 
proper  place  in  a  drawer.  This  drawer  is  divided  into 
rows  with  31  compartments,  with  a  row  for  each 
principal  market  to  be  used.  When  a  card  is  filed  its 
location  is  determined  by  the  destination  named  in 
the  bill  of  lading,  and  by  the  day  of  month  on  which 
the  consignment  is  due  at  its  destination.  This  would 
show  only  the  cars  being  handled  by  that  particular 
association.  News  of  other  shipments  and  of  their 
destination  and  time  of  arrival  should  be  furnished  in 
order  to  perfect  the  system.  The  information  con- 
templated to  be  furnished  by  the  bill  referred  to  would 
solve  trie  question.  The  smaller  shippers  could  use 
the  "pick  up"  system  of  collecting  cars  and  handle 
under  a  similar  system.  This  would  leave  the  smaller 
places  to  the  small  individual  shippers  with  little  com- 
petition. They  could  be  kept  informed  by  daily  bul- 
letins of  current  movements  and  prices,  thus  securing 
a  better  guide  than  has  ever  been  furnished  the  small 


Markets    and   Rural   Economics  209 

shipper  for  determining  marketing  opportunities. 
With  the  information  gathered,  and  at  the  com- 
mand of  the  producers  and  consumers  generally,  the 
foundation  would  be  furnished  for  the  establishing  of 
selling  and  purchasing  associations  that  would  obvi- 
ate millions  of  dollars  of  waste  in  the  United  States 
annually. 

Hon.  Hatton  W.  Summers,  of  Texas,  said  in  Con- 
gress, March  14,  1914: 

"Merely  to  give  a  man  out  on  the  Rio  Grande,  or 
in  Arkansas,  or  anywhere  else  information  with  ref- 
erence to  the  fact  that  the  country  needs  so  much 
stuff  will  not  benefit  him  or  prevent  waste.  The 
Agricultural  Department  goes  down  to  the  Rio 
Grande  and  says  it  is  a  good  section  for  the  production 
of  vegetables.  The  people  there  respond  to  the  sug- 
gestion of  the  Agricultural  Department  and  put  in 
crops.  I  told  the  House  the  other  day  of  a  man  who 
raised  nine  carloads  of  head  lettuce.  He  sent  out  100 
heads  by  parcel  post  to  different  markets,  and  they 
were  pronounced  to  be  as  fine  as  the  market  produced. 
He  shipped  two  carloads.  On  one  carload  he  paid 
freight  amounting  to  $9  in  excess  of  the  price  that 
the  lettuce  brought  him  and  on  the  other  $13  freight 
in  excess. 

uThe  Agricultural  Department  went  out  in  east 
Texas  and  told  the  people  there  that  that  was  a 
great  fruit  country.  They  went  into  the  fruit-pro- 
ducing business,  and  one  concern  spent  $400,000;  but 
the  year  before  last  they  cut  down  400  acres  of  these 
trees.  Now,  gentlemen,  we  approach  a  situation  that 
is  entirely  different  from  anything  that  has  heretofore 
confronted  the  world.  In  the  old  days  every  man 
produced  practically  what  he  needed,  and  the  com- 


2io  Markets    and   Rural   Economics 

munities  supplied  their  own  wants ;  but  to-day  we  must 
depend  upon  shipping  our  stuff  from  the  field  of  pro- 
duction to  the  field  of  consumption.  The  individual 
farmer  sends  out  his  stuff  without  knowing  where  to 
send  it.  He  sends  it  out  into  the  dark.  One  market 
may  be  glutted,  while  another  is  inadequately  supplied. 
The  purpose  of  this  amendment  is  to  enable  the  De- 
partment of  Agriculture  to  aid  in  the  constructive 
work  of  improving  the  methods  of  sale  and  distribu- 
tion. We  go  out  and  teach  a  man  how  to  raise  the 
stuff,  but  after  he  has  raised  it  he  says:  'What  shall 
I  do  with  it?  I  do  not  know  where  to  send  it.' 
The  farmer  is  better  prepared  to  deal  with  the  diffi- 
culties of  production  without  help  from  the  Govern- 
ment than  he  is  with  the  difficulties  of  mar- 
keting it,  and  everybody  knows  it.  We  know 
that  the  individual  farmer  out  in  the  fields 
does  not  know  where  to  send  his  products.  He  has 
plead  with  Congress  for  help  along  constructive  lines 
in  improving  methods  of  and  facilities  for  sale  and 
distribution,  help  which  he  is  entitled  to  and  which 
the  interests  of  the  country  demand  should  be  given, 
and  we  toss  him  a  few  packages  of  garden  seed,  with 
our  names  on  each  package,  send  him  some  bulletins, 
and  tell  him  what  a  deep  affection  we  have  for  him. 
It  is  a  shame.  No  member  has  offered  or  can  offer  a 
meritorious  reason  why  the  department  should  not 
help  improve  the  methods  of  sale  and  distribution  in 
order  that  the  farmer  can  get  a  fair  return  for  his 
labor,  where  the  hungry  consumer  in  the  city  can  get 
his  food  supply  without  paying  an  exorbitant  price. " 


Markets    and   Rural   Economics  211 

What  has  Germany  done  along  this  line? 

What  has  England  done? 

What  has  New  York  done? 

What  has  California  done? 

What  has  Wisconsin  done? 

Is  it  not  analogous  to  this  kind  of  government  aid 
to  furnish  the  information  necessary  to  bring  the 
seller  and  the  buyer  in  touch  with  each  other — and 
do  it  by  timely  methods  that  can  be  put  to  practical 
use? 

What  has  the  State  of  New  York  done  toward  in- 
vestigating the  subject  of  markets? 

What  were  the  conclusions  of  the  Commission  ap- 
pointed as  to  the  annual  savings  that  could  be  made 
in  New  York  City  alone  in  buying  food  stuffs? 

What  did  the  Commission  recommend  as  to 
changes  in  city  charters?  Why? 

LESSON  XXX 

What  organization  has  most  persistently  urged  a 
better  system  of  marketing? 

What  steps  did  it  take  to  get  the  government  to 
establish  a  Bureau  of  Markets? 

What  are  the  provisions  of  the  bill  written  by  the 
National  Legislative  Committee  of  the  organization 
and  introduced  by  its  request? 

LESSON  XXXI 

Does  anv  government  maintain  a  Department,  Bu- 
reau, or  Division  of  Markets? 

Why  do  the  economics  of  distribution  concern  every 
citizen? 


212  Markets    and   Rural   Economics 

Why  do  so  few  have  the  statistical  information 
needed  on- the  subject  of  markets? 

What  is  the  objection  to  the  usual  method  of  pri- 
vate companies  securing  this  information  for  their  in- 
dividual benefit? 

Are  facts  concerning  markets  of  as  much  impor- 
tance to  the  Dublic  as  the  prognostications  sent  out  by 
the  Weather  Bureau? 

Why  are  the  reports  published  in  the  papers  not 
sufficient  for  the  purposes  of  the  shipper  of  perish- 
ables ? 

Could  not  the  government  develop  a  system  of 
market  reports  similar  to  the  weather  reports? 

Does  the  government  press  into  service  the  entire 
Consular  force  to  furnish  daily  reports  for  the  benefit 
of  exporters? 

Ought  it  to  do  more  for  them  than  it  does  for  the 
farmer  and  the  city  consumer? 

LESSON  XXXII 

Has  there  been  any  attempt  on  the  part  of  leading 
governments  to  furnish  a  Bureau  of  Information  free 
to  the  people  wanting  employment  and  the  man  want- 
ing help — skilled  or  unskilled — the  information 
sought  ? 

In  what  way  could  the  government  agents  cooper- 
ate with  the  shippers  and  city  buyers  to  the  mutual 
help  of  producer  and  consumer? 

Describe  the  "passing"  reports  system  in  keeping 
track  of  shipments. 

Describe  the  "pick-up"  system  of  shipping. 

Explain  the  workings  of  the  plan  of  large  shippers 
in  keeping  tab  on  cars  and  the  markets  and  changing 
routes  of  cars? 

In  what  way  could  the  small  shipper  profit  by  the 
information  proposed  to  be  furnished  under  the  bill? 


CHAPTER  XXIV 

INTERNATIONAL  INSTITUTE  OF  AGRICULTURE 

According  to  "Monographs  on  Agricultural  Co- 
operation in  Various  Countries,"  the  report  of  the 
International  Institute  of  Agriculture,  the  following 
is  what  it  is  and  what  it  is  doing: 

uThe  International  Institute  of  Agriculture  was  es- 
tablished under  the  International  Treaty  of  June  yth, 
1905,  which  was  ratified  by  40  governments.  Eight 
other  governments  have  since  adhered  to  the  Insti- 
tute. 

"It  is  a  Government  Institution  in  which  each 
Country  is  represented  by  delegates.  The  Institute 
is  composed  of  a  General  Assembly  and  a  Permanent 
Committee. 

"The  Institute,  confining  its  operations  within  an 
international  sphere,  shall : 

"(a)  Collect,  study  and  publish  as  promptly  as 
possible  statistical,  technical,  or  economic  information 
concerning  farming,  vegetable  and  animal  products, 
the  commerce  in  agricultural  products,  and  the  prices 
prevailing  in  various  markets: 

"(b)  Communicate  to  parties  interested,  also  as 
promptly  as  possible,  the  above  information; 

"(c)  Indicate  the  wages  paid  for  farm  work; 

"(d)  Make  known  the  new  diseases  of  vegetables 
which  may  appear  in  any  part  of  the  world,  showing 


214  Markets    and   Rural   Economics 

the  territories  infected,  the  progress  of  the  diseases 
and,  if  possible,  the  remedies  which  are  effective; 

u(e)  Study  questions  concerning  agricultural  co- 
operation, insurance,  and  credit  in  all  their  aspects; 
collect  and  publish  information  which  might  be  use- 
ful in  the  various  countries  for  the  organization  of 
works  connected  with  agricultural  cooperation,  insur- 
ance, and  credit; 

"(f)  Submit  for  the  approval  of  the  Governments, 
if  there  is  occasion  for  it,  measures  for  the  protection 
of  the  common  interests  of  farmers  and  for  the  im- 
provement of  their  conditions,  after  having  utilized 
all  the  necessary  sources  of  information,  such  as  the 
wishes  expressed  by  international  or  other  agricultural 
congresses  or  by  congresses  of  science  applied  to  agri- 
culture, or  agricultural  societies,  academies,  learned 
bodies,  etc. 

"The  Institute  publishes:  (a)  a  Monthly  Bulletin 
of  Agricultural  Statistics;  (b)  a  Monthly  Bulletin  of 
Agricultural  Intelligence  and  Diseases  of  Plants;  (c) 
a  Monthly  Bulletin  of  Economic  and  Social  Intelli- 
gence. 

"It  has  also  published  a  volume  on  'The  Organiza- 
tion of  Agricultural  Statistical  Services  in  the  Several 
Countries/  and  a  volume  on  'Statistics  of  Cultivated 
Areas  and  of  Vegetable  and  Animal  Production  in 
the  Adhering  Countries'  (an  inventory  drawn  up  from 
documents  published  by  Governments),  and  'Studies 
upon  the  Present  Condition  of  Agricultural  Associa- 
tion in  Various  Countries  (2  vols.)." 

This  Institute  is  the  creature  of  the  brain  of  David 
Lubin,  of  Sacramento,  California.  He  was  interested 
in  understanding  how  and  when  the  price  of  wheat 
was  determined.  He  visited  Chicago,  New  York, 
Liverpool,  and  other  market  centers,  studying  the 


Markets    and   Rural   Economics  215 

subject  of  world  markets,  and  the  agencies  operat- 
ing to  determine  price.  He  came  to  the  conclusion 
that  there  was  need  of  an  international  center,  where 
all  kinds  of  information  on  the  subject  could  be  col- 
lected, and  from  whence  the  information  thus  col- 
lected could  be  disseminated  to  the  mutual  advantage 
of  the  people  of  every  nation  of  the  globe;  this  cen- 
tral head  office  for  collecting  and  disseminating  facts 
concerning  world  production  and  world  consumption 
to  be  free  from  any  connection  with  any  commercial 
scheme  for  speculation  or  manipulation;  under  no 
obligation  to  any  business  for  its  support;  but  a  world 
clearing  house  of  information  on  agricultural  subjects 
affecting  the  rural  affairs  of  all  countries.  Mr.  Lubin 
presented  his  plan  to  a  number  of  people,  and  was 
finally  successful  in  interesting  the  King  of  Italy,  to 
the  extent  of  inducing  him  to  establish  headquarters 
for  such  an  institute  in  Rome. 

Mr.  Lubin  is  the  permanent  delegate  of  the  United 
States  to  the  Institute.  He  has  had  much  to  do  in 
bringing  its  work  to  the  attention  of  the  public,  and 
furnishing  important  information  on  movements  for 
rural  betterment  in  the  different  nations  represented 
in  the  Institute. 

The  establishing  of  this  Institute  is  one  of  the  ex- 
amples of  the  cosmopolitan  nature  of  modern  indus- 
try. It  is  a  finger-board  pointing  to  the  day  when 
the  world  will  be  one's  home  and  not  the  circum- 
scribed boundaries  of  neighborhood,  state,  or  conti- 
nent. Every  one  on  the  face  of  the  globe  is  in  com- 
petition with  every  other  one,  and  yet  the  products 
of  every  one  are  at  the  command  of  every  one — at  a 
price.  Commerce  is  international;  markets  are  inter- 
national; economics  must  be  studied  as  world-wide  in 
its  application.  The  products  of  every  clime  find  con- 


216  Markets    and   Rural   Economics 

sumers  in  the  utmost  parts  of  the  earth,  and  those  who 
extend  their  knowledge  to  world  production  and 
world  consumption  are  the  only  ones  competent  to 
handle  the  marketing  problems  of  the  Twentieth  Cen- 
tury. The  International  Institute  of  Agriculture  is 
an  agency  at  the  service  of  all  the  nations  in  this  line. 
However,  the  usefulness  of  its  collected  facts  depends 
on  their  timeliness  and  the  dispatch  with  which  they 
can  be  made  available  to  the  buyers  and  sellers  of 
the  trade  centers  of  all  countries. 

LESSON  XXXIII 

What  is  the  International  Institute  of  Agriculture? 

When  was  it  organized  and  what  were  its  purposes? 

Who  was  our  first  permanent  delegate  and  what 
part  did  he  play  in  its  founding? 

What  can  you  say  of  the  geographical  extent  of 
influences  determining  prices? 

What  kind  of  knowledge  is  necessary  to  master 
marketing  problems  of  today? 

What  of  the  utility  of  information  depending  on 
its  timeliness? 


CHAPTER  XXV 

RURAL  CREDITS 

It  seems  that  there  is  no  more  difficult  problem 
than  the  fair  adjustment  of  the  finances  of  society. 
The  further  we  go  in  our  complex  civilization  the 
more  difficult  the  adjustment  on  the  lines  of  equity. 
The  question  of  rural  credits  is  both  a  question  of 
rural  economics  and  of  markets.  America  is  far 
behind  European  countries  in  the  question  of  rural 
credits.  For  one  to  suggest  that  the  average  Amer- 
ican is  better  off  than  the  average  European  does 
not  prove  that  there  is  not  merit  in  the  rural  credit 
systems  of  the  Old  World.  Were  they  abolished  the 
people  of  those  countries  utilizing  rural  credits  would 
suffer  intensely  from  the  economic  calamities  that 
would  follow. 

The  central  idea  in  the  rural  credit  systems  of 
Europe  is  easily  stated:  By  combining  assets  and 
owning  institutions  which  receive  and  utilize  deposits, 
the  farmers  are  in  position  to  secure  money  at  lower 
rates  of  interest  and  in  sufficient  volume  to  carry  on 
large  enterprises  and  be  independent  of  a  bank  boy- 
cott, money  trust,  credit  monopoly  or  sporadic  panic. 

Agricultural  credit  banks  may  be  divided  as: 
State-controlled; 

Joint-stock,  or  private  profit-sharing; 
Cooperative. 

They  may  also  be  divided  as : 


218  Markets    and  Rural   Economics 

Land-mortgage  banks; 
Personal  credit  banks. 

Another  division  would  be  based  on : 
Unlimited  liability; 
Limited  liability. 

Still  another  classification  would  be : 

Run  for  profit,  with  paid  officials; 
Run  for  use  and  not  profit,  and  gratuitous 
management. 

The  immediate  objects  and  purposes  of  these  banks 
are: 

The  provision  of  capital  at  low  rates  of  interest; 

The  purchase  of  agricultural  requirements; 

The  preparation  and  sale  of  agricultural  products; 

Farm  insurance. 

The  general  working  principle  is  along  the  follow- 
ing plan : 

The  individual  who  gets  the  money  secures  the 
local  association; 

The  local  association  secures  the  federated  head; 

The  federated  head  finds  the  money,  secures  it  to 
the  lender,  and  sends  it  to  the  local  association,  which 
turns  it  over  to  the  borrower. 

It  seldom  sells  consumptive  credit,  but  sees  to  it 
that  each  loan  is  for  productive  use. 

The  four  great  elements  of  material  prosperity  are : 
(i)  agriculture,  (2)  productive  urban  labor — includ- 
ing mine  labor,  (i)  commerce,  (4)  finance. 

In  the  United  States,  finance  and  commerce  have 
locked  shields  in  a  common  cause  and  have  prospered 
amazingly.  Agricultural  and  urban  labor  stand  aloof 
and  are  fighting  a  losing  battle.  Commerce  has  a 
dynamic  dollar  and  agriculture  has  a  static  dollar. 
Commerce  has  a  liquid  credit  and  agriculture  has  a 
viscous  credit.  Commerce  can  mobilize  its  capital 


Markets   and   Rural   Economics  219 

credit  and  agriculture  cannot.  Agriculture  needs  a 
system  that  will  vitalize  its  resources,  mobilize  its 
capital,  liquefy  its  assets  and  render  dynamic  its  col- 
lateral. 

American  farmers  borrow  billions  of  dollars.  Mil- 
lions could  be  saved  by  borrowing  together.  The 
same  farmers  have  hundreds  of  millions  on  deposit, 
bringing  in  from  nothing  to  4  per  cent.  When  a 
farmer  deposits  in  the  banks,  by  the  interrelationship 
which  exists,  and  for  which  the  individual  bank  is 
not  to  blame,  the  money  is  concentrated  by  a  series 
of  deposits  in  a  few  centers — but  not  available  for 
use  by  other  farmers.  When  it  is  borrowed,  the  rate 
is  raised  to  double  what  is  allowed  for  it  on  deposit. 

All  of  this  money  might  be  better  handled  and 
put  to  profitable  use  instead  of  concentrating  it.  The 
same  farmers  sell  billions  of  dollars'  worth  of  prod- 
ucts a  year,  following  hazardous  and  profligate  meth- 
ods. By  wise  cooperative  marketing  more  millions  a 
year  could  be  saved.  A  great  percentage  of  these 
same  farmers  buy  hundreds  of  millions  on  credit  and 
pay  enormous  prices.  There  is  no  greater  load  on 
the  back  of  labor  than  credit  buying.  Hundreds  of 
millions  could  be  saved  by  cooperative  cash  buying. 

According  to  deductions  drawn  from  the  last  cen- 
sus report  and  the  best  data  available,  the  farmers 
of  the  United  States  are  indebted  as  follows : 

Farm  mortgages  on  land  operated  by  owners, 
$1,726,000,000. 

Tenant  farm  mortgages,  $1,320,000,000. 

Average  amount  of  current  loans  to  farmers  on 
account  of  crops,  chattels,  etc.,  $3,000,000,000. 

This  makes  an  approximate  debt  of  $500  on  fixed 
capital  and  a  current  debt  of  the  same  amount  to 
each  farmer  at  the  head  of  a  family. 


220  Markets    and   Rural   Economics 

The  rate  of  interest  he  pays,  including  the  expense 
of  securing  loans,  is  about  8%%;  which  means  that 
the  farmers  are  paying  about  $510,000,000  a  year 
on  borrowed  capital. 

The  corporation  way  of  securing  capital  is  to  bond 
the  company  and  market  the  bonds,  debentures,  mort- 
gages or  other  evidence  of  indebtedness  and  market 
them  at  the  lowest  rates  of  interest  that  can  be  se- 
cured. This  enables  the  manufacturer,  transportation 
company  or  franchise  corporation  to  get  money  at 
6  per  cent,  or  a  lower  rate. 

Under  our  present  banking  system  the  National 
banks  are  not  permitted  to  loan  money  on  real  estate 
securities,  except  for  short-time  loans.  The  larger 
banks  have  been  stuffed  with  stocks  and  bonds,  and 
with  commercial  paper  as  security  for  loans,  while 
denying  such  loans  to  farmers.  The  country  banks 
in  like  manner  carry  thousands  of  bonds  and  stocks 
of  local  industries  while  shunning  like  accommoda- 
tions to  farmers.  Country  bankers  are  not  willing 
to  pay  more  than  three  or  four  per  cent,  on  time 
deposits;  and  these  same  bankers  will  not  loan  to 
the  same  men  on  real  estate  mortgage  for  less  than 
six  per  cent.,  with  interest  payable  semi-annually  in 
advance,  or  at  a  higher  rate  if  payable  annually. 

The  ordinary  bank  prefers  to  make  short  time 
loans  at  high  rates,  and  by  turning  over  their  ac- 
counts often,  it  amounts  to  compounding  the  interest 
as  often  as  a  loan  is  made  and  collected.  This  kind 
of  loaning  and  the  regular  discounting  is  more  attrac- 
tive than  the  long  time  loans  required  by  the  farmer 
who  is  trying  to  pay  for  a  farm.  The  custom  of 
every  one  putting  his  money  in  bank  rather  than 
keeping  it  at  home  has  greatly  accelerated  the  move- 
ment of  money.  The  small  banks  can  then  deposit 


Markets    and   Rural   Economics  221 

with  their  correspondent  banks  a  certain  percentage 
of  these  deposits;  these  banks  in  turn  can  redeposit 
in  larger  banks  or  loan  direct.  In  either  case  the 
money  finds  its  way  to  the  big  corporations  which 
furnish  their  securities  for  loans  at  low  rates.  This 
process  leads  to  inflation  in  certain  lines  of  business 
and  stringency  in  other  lines  of  business. 

It  is  a  mistake  to  measure  prosperity  by  bank  de- 
posits. It  ceases  to  be  a  good  indication  when  it 
shows  a  dearth  of  local  investment.  The  deposits  in 
the  savings  banks  alone  in  the  United  States,  during 
the  summer  of  1912,  amounted  to  $4,000,000,000. 
Thirty-two  and  a  half  per  cent,  of  this  was  in  the 
New  England  States,  with  only  seven  per  cent,  of 
the  population.  This  did  not  mean  that  the  New 
England  States  were  more  prosperous  than  the  agri- 
cultural States  of  the  Middle  West,  where  the  de- 
posits were  much  lower.  The  six  Western  States  of 
Indiana,  Wisconsin,  Minnesota,  Nebraska,  Kansas 
and  Oklahoma  had  only  $63,000,000  in  savings  de- 
posits. These  States  were  more  prosperous  than  the 
New  England  States.  We  find  an  anomaly  in  the 
fact  that  Iowa  had  $168,000,000  of  savings  bank 
deposits.  Iowa  was  prosperous  also.  There  are  more 
wage-earners  in  the  New  England  States  because  of 
manufacturing,  and  the  Western  States  named  are 
mostly  agricultural,  which  would  account  in  part  for 
the  people  putting  more  money  in  savings  banks  in 
the  Eastern  States  than  in  the  Western  States  named. 
But  that  difference  does  not  apply  in  the  case  of  Iowa, 
as  it  is  no  more  a  manufacturing  State  than  the  other 
Western  States  in  the  group  named. 

The  tendency  of  farmers  to  move  to  town,  as  soon 
as  they  get  prosperous  enough  to  afford  it,  is  develop- 
ing an  absentee  landlordism  in  this  country.  If  we 


222  Markets    and   Rural   Economics 

had  a  system  of  rural  credit,  operated  so  as  to  allow 
the  absentee  land  owner  to  sell  his  land  to  the  land- 
less, and  find  a  safe  investment  which  is  as  permanent 
as  he  may  desire  to  have  it,  and  at  the  same  time  be 
an  investment  on  which  he  can  realize  at  any  time  in 
case  he  decides  to  re-invest  in  land,  it  would  be  es- 
pecially desirable  to  lessen  tenancy.  A  mortgaged 
home  is  bad  enough;  a  rented  home  is  worse.  Ten- 
ancy is  not  the  normal  state  of  man,  and  any  agency 
that  tends  to  produce  it  is  an  agency  to  be  avoided. 

Whether  the  rural  credit  systems  in  vogue  in  Eu- 
rope lead  to  home  ownership  or  to  tenancy  affords  a 
good  criterion  by  which  to  judge  them.  As  to  whether 
the  farm  mortgage  is  an  intermediate  stage  in  an 
ascending  scale  from  tenancy  to  land  ownership,  or 
an  intermediate  stage  in  a  descending  scale  from  land 
ownership  to  tenancy,  is  a  question  worth  consider- 
ing. It  may  very  easily  be  either  the  one  or  the 
other. 

There  is  hardly  a  country  on  the  continent  of 
Europe  but  has  a  system  of  rural  credits;  there  are 
few  in  America.  There  are  so  many  varieties  and 
so  many  variations  of  varieties,  that  it  is  only  with 
the  fundamentals  of  the  more  important  systems  that 
we  shall  deal. 

The  money-lending  shark  has  cursed  every  age; 
and  the  debt-shirking  scoundrel  has  been  his  boon 
companion.  Many  money-lending  concerns  belong  to 
individuals  of  disreputable  character,  dealing  prefer- 
ably with  unfortunates.  Cooperative  credit  elimi- 
nates both  characters. 

The  credit  societies  are  controlled  by  the  borrow- 
ing members;  the  credit  is  given  on: 
Personal,  or 
Realty. 


Markets    and   Rural   Economics  223 

The  realty  credit  takes  little  account  of  character. 
Personal  credit  takes  both  character  and  solvency 
into  consideration. 

There  are  five  departments  of  cooperative  effort: 

1.  Cooperative  credit  societies    (banks),  which  may 

be   associations  of  producers  or  consumers,   or 
both. 

2.  Cooperative  agricultural  societies  which  are  asso- 

ciations of  producers. 

3.  Cooperative   urban  workers'    societies   which   are 

associations  of  producers. 

4.  Cooperative  mercantile  societies  which  are  asso- 

ciations of  distributors. 

5.  Cooperative  industrial  societies  which  are  associa- 

tions of  producers. 

Sometimes  the  last  two  named  are  combined  into 
one — as  the  Cooperative  Wholesale  Society,  Limited, 
of  Manchester,  England. 

Certain  kinds  of  cooperation  can  exist  under  cer- 
tain conditions  and  cannot  exist  under  certain  other 
conditions. 

Cooperation  in  selling  has  reached  its  highest  state 
of  development  in  Denmark,  where  the  farmers  own 
their  own  homes. 

Cooperative  credit  has  reached  its  highest  state  of 
development  in  Germany,  where  most  of  the  farmers 
own  their  own  homes. 

Cooperation  in  buying  has  reached  its  highest 
state  of  development  in  England,  where  the  people 
do  not  own  their  own  homes. 

Cooperation  has  never  succeeded  anywhere  with 
people  of  different  races,  or  with  a  shifting  popula- 
tion. 

Cooperation  does  not  depend  on  government  aid, 
but  goes  forward  with  greater  strides  with  it.  The 


224  Markets    and   Rural   Economics 

advisability  of  government  aid  is  a  question  of  dis- 
pute, even  when  both  government  ai$l  and  individual 
initiation  and  operation  have  been  tried. 

LESSON  XXXIV 

What  is  the  most  difficult  problem  of  civilization? 

What  does  the  question  of  rural  credits  concern? 

What  is  the  central  idea  in  rural  credits? 

Give  four  divisions  of  agricultural  banks. 

Give  the  immediate  object  of  these  banks. 

Give  their  general  working  principles. 

What  is  meant  by  consumptive  credit  and  produc- 
tive use  ? 

What  are  the  four  prime  elements  of  material 
prosperity? 

Which  of  these  have  worked  together  and  which 
have  stood  apart? 

What  is  meant  by  dynamic  dollar  and  static 
dollar? 

What  can  you  say  of  credit  buying? 

What  is  the  difference  between  the  farmer's  way 
of  financing  himself  and  the  corporation's  way  of 
financing?  , 

LESSON  XXXV 

Why  is  it  that  commercial  banking  is  unsuited  for 
farm  requirements? 

What  can  you  say  of  the  concentration  of  deposits? 

Is  the  amount  of  bank  deposits  necessarily  a  good 
criterion  by  which  to  judge  prosperity?  Illustrate. 

What  could  be  done  to  induce  absentee  landlords 
to  sell  lands  to  tenants? 

By  whom  are  the  credit  banks  controlled? 


Markets    and   Rural   Economics  225 

On  what  do  they  make  loans? 

Name  the  departments  of  cooperative  effort. 

What  is  the  object  of  each? 

Where  has  cooperative  selling  reached  its  greatest 
proficiency,  and  what  resulted? 

Where  has  cooperative  finance  received  the  most 
attention,  and  with  what  results? 

Where  has  cooperative  buying  reached  its  highest 
development  ?  Illustrate. 

Where  has  cooperation  never  succeeded? 

What  of  cooperation  and  government? 


CHAPTER  XXVI 

RURAL  CREDITS  IN  EUROPE 

In  Germany 

The  Credit  Bank  had  its  origin  in  Germany.  Dur- 
ing the  first  half  of  the  Nineteenth  Century  the  poor 
farmers  and  artisans  of  Europe,  who  had  no  recourse 
to  banks  or  large  capitalists,  suffered  immensely  from 
the  extortions  of  the  usurers.  By  the  middle  of  the 
century,  farming  had  fallen  into  a  most  deplorable 
condition.  The  acute  distress  of  the  poor  found  vent 
in  revolutions,  and  uprisings  throughout  Europe. 
Competition  from  new  countries  of  immense  terri- 
tory and  virgin  soil,  aided  by  quick  transportation, 
made  it  possible  to  flood  the  markets  of  the  world 
with  agricultural  products,  and  this  aggravated  the 
distress  of  the  peasant  laborers  of  Europe.  To  make 
headway  against  this  competition,  and  the  well  nigh 
helpless  condition  of  the  masses,  necessitated  a  com- 
plete transformation  in  methods  of  finance  and  credit. 
The  movement  in  Germany  started  unostentatiously 
by  private  initiative,  without  the  aid  of  government. 
Its  pioneer  founders  were  two  burgomasters,  Herr 
Schulze  of  Delitzsch  in  Saxony,  and  Herr  F.  W.  Raif- 
feisen,  burgomaster  of  a  group  of  villages  around 
Neuwied. 

The  economic  waste  resulting  from  want  of  capital 
appealed  to  them,  and  they  set  forth  a  remedy.     As 


Markets    and   Rural   Economics  227 

the  outcome  we  have  two  systems,  differing  partly  in 
the  functions  they  perform  and  partly  in  the  spirit 
animating  the  founders  and  promoters.  In  1850 
Schulze  founded  the  first  loan  society  in  Delitzsch- 
Eilenburg,  with  ten  members,  all  artisans;  remodeled 
two  years  later  as  a  self-supporting  institution  with 
a  capital  stock  and  shares.  In  1848,  Raiffeisen 
founded  a  cooperative  society;  in  1849  he  founded  a 
loan  society  of  rich  philanthropists,  who  sold  cattle 
at  easy  rates  to  unprovided  farmers;  but  it  was  not 
till  1862  that  he  organized  a  loan  society  at  An- 
bausen,  in  which  the  borrowing  farmers  were  the 
members. 

Schulze-Delitzsch  organized  the  first  congress  of 
banks  in  1859,  which  resulted  in  the  General  Union 
of  German  Industrial  Cooperative  Societies,  of  which 
he  was  director  to  his  death,  in  1883.  He  secured 
from  Prussia  the  first  cooperative  law,  in  1867,  which 
was  converted  into  an  imperial  law,  in  1889,  when 
limited  liability  was  permitted  to  all  forms  of  cooper- 
ative societies. 

Up  to  this  time  the  old  law  of  1868  recognized 
only  unlimited  liability  in  the  regulation  of  credit 
banks;  now  each  bank  adopts  the  plan  it  prefers.  All 
the  credit  societies  were  organized  to  provide  credit 
facilities  for  their  members  only.  The  Schulze-De- 
litzsch banks  raised  their  funds  by  share  capital  and 
unlimited  liability.  The  Raiffeisen  banks  raised  their 
funds  by  unlimited  liability  and  by  deposits.  There 
were  in  IQI2  in  Germany  24,000  cooperative  soci- 
eties. In  June,  1910,  there  were  15,476  Raiffeisen 
cooperative  banks.  The  total  business  done  under 
this  system  during  1909  was  $1,557,293,580;  and 
the  total  business  done  by  the  Schulze-Delitzsch  dur- 


228  Markets    and  Rural   Economics 

ing  1910  was  $3,231,801,035;  a  grand  total  of 
$4,789,094,615. 

Since  February,  1905,  the  German  cooperative 
societies  (with  one  exception)  have  proceeded  under 
one  general  plan.  The  Imperial  Federation  of  Ger- 
man Cooperative  Societies,  representing  officially  the 
interests  of  more  than  19,000  agricultural  coopera- 
tive^ societies,  comprising  about  1,750,000  members. 
There  were  some  fundamental  differences  in  the  ideas 
of  the' two  founders  of  credit  banks  in  Germany. 

The  Schulze  ideas  were  those  of  strict  business: 
Buy  your  stock;  earn  dividends:  pay  the  bank's  work- 
ing officials;  pool  realty,  personal  property,  and  char- 
acter, to  secure  money  at  the  lowest  rates  of  interest 
obtainable  in  the  broadest  markets. 

The  Raiffeisen  ideas  were  more  sentimental :  Pool 
your  personal  character  and  personal  property,  and 
pledge  it  in  partnership  with  unlimited  liability;  with 
these  secure  deposits  and  use  these  deposits  to  loan  to 
the  members  at  the  rate  allowed  the  depositors,  plus 
a  margin  to  cover  expenses,  which  were  almost  noth- 
ing, as  the  members  paid  no  entrance  fee,  took  no 
stock,  got  no  dividends  and  paid  nothing  to  the  offi- 
cials of  the  association. 

During  the  more  than  half  century  the  two  sys- 
tems have  been  in  operation  they  have  undergone  a 
number  of  modifications,  some  voluntarily  and  some 
because  of  law  requirements,  still  there  is  a  marked 
line  of  distinction  between  them. 

The  Schulze-Delitzsch  bank  is  in  the  main  an  ur- 
ban bank;  the  Raiffeisen  bank  is  entirely  a  rural  bank. 
The  former  requires  a  minimum  share  of  $26  to  se- 
cure membership;  the  latter  requires  merely  a  nom- 
inal sum  of  two  or  three  dollars  to  comply  with  the 


Markets   and   Rural   Economics  229 

law  of  1889,  which  requires  all  banks  to  have  a  cap- 
ital stock. 

In  both  systems,  men  vote,  not  dollars.  Each 
member  has  one  vote,  regardless  of  the  number  of 
shares  he  owns,  the  amount  of  deposits  he  has,  or 
the  amount  he  borrows — nor  is  his  station  in  life  any 
consideration. 

This  is  not  so  different  from  the  rule  of  the  Bank 
of  England:  Each  shareholder  has  but  one  vote, 
irrespective  of  the  number  of  shares  he  owns,  and 
no  proxies  are  allowed.  The  voting  units  must  own 
$2,500  of  the  bank's  stock  and  about  twenty  times 
that  amount  of  interest  in  the  mercantile  interests  of 
England,  and  be  an  Englishman.  So  its  managers 
are  interested  in  making  it  serve  commerce,  serve  the 
borrower,  rather  than  have  it  thrive  as  a  distinct  pro- 
fession or  calling. 

Laws  governing  the  banks  of  Germany  provide 
for  three  kinds  of  liability:  (i)  Liability  limited  to 
the  amount  of  stock  held;  (2)  liability  not  extended 
to  the  creditors  of  the  local  bank  direct,  but  the  mem- 
bers are  liable  to  the  local  bank  to  the  amount  of 
the  sum  required  for  the  payment  of  all  creditors; 
(3)  individual  and  several  liability  of  the  members, 
both  toward  the  society  or  bank  and  to  the  creditors 
of  the  society,  fixed  in  advance  at  a  certain  sum. 

Raiffeisen  insisted  on  three  fundamental  tenets : 
Unlimited  joint  and  several  liabilities  of  the  mem- 
bers, (2)  restricted  area,  and  (3)  gratuitous  man- 
agement. 

Exceptions  to  these  tenets  led  to  the  adoption  of 
other  rural  credit  societies,  which  were  finally  welded 
into  a  national  federation  by  William  Haas,  known 
as  the  Darmstadt  Federation,  the  points  of  difference 
beina^on  questions  of  entrance  fees,  range  of  mem- 
bership, size  of  shares,  and  remuneration  of  officers. 


230  Markets    and  Rural   Economics 

After  the  death  of  Haas  and  the  loss  of  his  leader- 
ship this  division  began  to  go  back  to  the  Raiffeisen 
type,  and  in  July,  1913,  the  two  were  consolidated. 
The  Raiffeisen  system  is  based  on  mutual  confidence 
and  aid.  This  requires  a  more  restricted  member- 
ship, as  every  one  needs  to  know  every  other  one  in 
the  local  association,  and  be  able  to  observe  just  how 
the  bank's  money  is  being  used.  The  borrower  is 
required  to  find  sureties  and  give  other  collateral  se- 
curity for  payment  of  the  loan,  and  he  binds  himself 
to  apply  his  loan  to  a  specific  purpose,  which  is  re- 
quired to  be  a  productive  purpose. 

The  capital  which  the  rural  banks  have  at  their 
disposal  for  the  purpose  of  making  loans  to  their 
members  is  secured  from  four  sources  :  ( i )  Capital 
(which  is  very  little  with  the  Raiffeisen  banks)  ;  (2) 
the  reserve  fund,  accumulated  in  previous  years 
(which  is  also  small  and  divided  into  the  reserve 
fund  proper  and  the  reserve  fund  corresponding  to 
the  dividend)  ;  (3)  the  savings  deposits  made  either 
by  members  or  non-members,  and  deposits  on  current 
accounts  made  by  members  only;  (4)  the  money 
which  the  bank  obtains  by  means  of  loans  from  cen- 
tral cooperative  banks,  other  banks  or  private  indi- 
viduals. 

In  1909,  of  the  nearly  two  billion  marks  ($479,- 
000,000)  loaned  to  farmers  of  the  German  Empire, 
only  1 1.2%  were  furnished  by  outsiders,  while  88.8% 
came  from  the  savings  and  deposits  of  the  farmers 
themselves,  or  of  the  local  public. 

Loans  of  the  rural  banks  are  of  two  kinds :  On 
current  account  and  for  fixed  periods.  At  the  close  of 
1909,  71.7%  of  the  loans  were  for  fixed  periods,  and 
28.3%  on  current  accounts.  Members  guarantee  the 
payment  of  their  obligations  by  offering  securities; 


Markets   and   Rural   Economics  231 

by  deposit  of  valuables,  share  certificates,  etc.;  by 
mortgage ;  by  naked  promise.  By  securities  is  most  in 
vogue.  Terms  of  loan  vary  from  a  few  months  to 
a  few  years. 

Sometimes  a  farm  is  sold  in  allotments;  there  may 
be  several  buyers  who  want  to  pay  gradually;  the 
credit  bank  pays  the  price  of  the  estate  and  the  buyer 
becomes  the  debtor  of  the  credit  bank,  paying  off  by 
installments  at  moderate  rates  of  interest. 

A  Raiffeisen  bank  building  is  never  a  skyscraper 
nor  a  marble  palace.  It  is  usually  a  small  room,  per- 
haps by  a  farm  building,  or  in  the  farmers'  library, 
opened  twice  a  week  and  presided  over  by  a  single  oc- 
cupant, the  accountant. 

Once  a  week  the  half  dozen  directors  meet  and  dis- 
cuss the  various  credit  claims  which  have  arisen.  The 
accountant  receives  a  small  stipend  for  his  service, 
and  is  the  only  salaried  official.  The  Raiffeisen  sys- 
tem has  been  able  to  utilize  the  only  security  which 
the  small  agriculturist  has  to  offer,  namely,  his  per- 
sonal pledge  to  repay,  supposedly  by  the  guaranty  of 
men  of  his  own  class  and  standing.  It  has  been  able 
to  perform  the  function  of  furnishing  agricultural 
credit  without  subsidy,  subvention  of  the  government, 
or  charity  of  capitalists  this  system  and  the  Schulze- 
Delitzsch  system  of  cooperative  credit  passed  over 
into  Austria  in  1851,  Italy  in  1860,  into  Belgium  in 
1864,  into  France  in  1883,  into  Scotland  in  1889. 
and  into  Ireland  in  1894. 

The  Schulze-Delitzsch  type  of  credit  bank  is  more 
in  keeping  with  financialdom's  ideas  of  business. 
They  conduct  their  banking  over  a  considerable 
range  of  operation,  and  throughout  an  extended  area. 
The  profits  are  divided  into  two  parts :  reserve  fund 
and  dividend.  The  small  entrance  fees  are  added 


232  Markets    and   Rural   Economics 

to  the  reserve  fund.  It  is  customary  to  devote  all 
the  profits  for  a  year  or  two  to  the  reserve  fund, 
which  usually  amounts  to  about  one-fifth  of  the  share 
capital.  This  fund  can  only  be  used  to  cover  losses. 
Shares,  reserve  funds,  and  liabilities  constitute  the 
basis  on  which  supplies  of  capital  are  obtained.  These 
are  (i)  deposits,  (2)  re-discounts  by  outside  banks. 
These  banks  receive  savings  accounts  of  all  members, 
whether  they  borrow  or  not,  and  non-members  who 
can  not  borrow. 

There  is  three  and  a  half  per  cent,  attached  to 
deposits,  while  five  per  cent,  is  charged  on 'loans. 
Usually  a  notice  term  is  required  for  a  withdrawal 
of  deposits,  to  avoid  having  funds  called  for  which 
are  out  on  time  loans  before  they  can  be  returned. 

Accounts  are  opened  by  the  ordinary  deposits, 
which  are  handled  as  a  commercial  bank  would  con- 
duct a  similar  fund.  They  have  drawing  accounts. 
The  bank  acts  as  a  payman  for  the  customers  up  to 
the  limit  of  their  accounts,  paying  either  the  cus- 
tomers themselves,  or  their  creditors  in  whose  favor 
the  check  is  drawn.  Special  loans  are  negotiated 
from  individuals,  companies,  or  other  credit  societies. 
Public  moneys,  such  as  commercial  savings  bank 
funds,  are  sometimes  handled. 

The  credit  furnished  to  their  members  is  either: 
(i)  a  loan,  or  (2)  a  discount  of  a  trade  bill  of 
exchange. 

There  are  two  characters  of  loans:  (i)  an  or- 
dinary advance  of  money  on  whatever  securities  are 
offered;  (2)  in  the  favor  of  a  credit  limit,  within 
which  the  borrower  may  draw. 

A  borrower  may  secure  a  cash  credit  by  signing  a 
bill  of  exchange  promising  "At  sight  I  will  pay  to 


Markets    and   Rural   Economics  233 

bank  against  their  bill  of  exchange  the 

sum  of dollars." 

The  borrower  does  not  take  the  money  in  a  lump. 
Unlike  a  drawing  account  he  can  overdraw  his  ac- 
count up  to  the  limit  allowed  in  his  agreement.  If 
he  took  the  whole  sum  away  he  would  have  to  pay 
interest  on  the  whole  amount;  by  having  a  running 
credit  he  pays  interest  only  on  the  sum  standing  to  his 
debit  on  daily  balance. 

On  the  trade  bill  of  exchange  the  bank  gets  a 
discount.  This  is  where  A  owes  B,  but  does  not 
have  to  pay  for  a  specified  period,  and  B  shares  the 
account  by  discount  to  the  bank  for  immediate  cash. 

The  importance  of  the  distinction  is  obvious.  When 
considering  the  question  of  rediscounting,  the  outside 
bank  will  take  in  this  kind  of  bill  for  rediscount  pro- 
vided it  has  two  good  indorsers.  But  the  cooperative 
bank  still  has  an  interest  in  the  rediscounted  bill,  if 
the  bill  is  an  advance  bill;  for  it  signifies  a  loan, 
and,  if  the  borrowing  member  desires  a  renewal,  the 
cooperative  bank  must  negotiate  with  an  outside  bank 
to  consent  to  the  renewal.  A  bank  rediscounts  be- 
cause of  a  lack  of  sufficient  funds  to  hold  till  ma- 
turity all  the  bills  represented.  It  can  sell  cheaper 
than  it  buys  and  accommodate  its  customers. 

The  Schulze-Delitzsch  type  of  banks  are  used  by 
independent  agriculturists,  hand  workers,  shopkeep- 
ers, traders,  wage-earners  and  professional  men. 
When  the  farmer  mortgages  his  farm  he  does  not 
apply  to  a  credit  society  or  bank.  This  kind  of  credit 
is  obtaining  favor  in  life  insurance  companies,  sav- 
ings banks  and  land-mortgage  banks. 

The  land-mortgage  banks  are  either  joint-stock 
corporations  or  societies  of  borrowers.  The  latter 


234  Markets    and   Rural   Economics 

are   typified  by  the  original  type   of  land  banks — 
the 

GERMAN  LANDSCHAFTENS 

These  institutions  are  associations  of  land  owners; 
have  no  shares;  pay  no  dividends;  profits  go  to  re- 
duce loans;  official  services  gratuitous;  members  and 
borrowers  identical. 

They  date  from  the  reign  of  Frederick  the  Great. 
It  was  the  outcome  of  the  indebtedness  of  the  no- 
bility after  the  Seven  Years'  War.  This  was  the 
first  Landschaft.  Now  there  are  twenty-five  com- 
panies, and  the  mortgages  held  by  them  exceed  $500,- 
000,000,  with  interest  rates  at  3.5  to  4  per  cent.  The 
bonds  by  which  the  money  for  these  loans  were  ob- 
tained are  secured  by  a  mass  of  underlying  mortgages 
and  general  assets  of  the  issuing  association  and  by 
the  unlimited  liability  given  its  members.  Collective 
guarantee  and  loans  made  only  to  members  are  char- 
acteristic features  of  Landschaften,  but  there  is  a 
growing  tendency  to  limit  liability  and  substitute  re- 
serves for  emergencies.  Through  a  process  of  evo- 
lution, the  systems,  the  associations,  have  come  to 
assume  direct  responsibility  for  loans  and  give  cash 
to  members  for  their  mortgages,  raising  funds  for 
this  purpose  by  selling  bonds  of  even  denominations 
for  large  and  small  amounts.  Loans  are  made  pay- 
able by  annual  installments,  running  through  a  long 
period  of  years,  and  the  installments  set  aside  to  re- 
deem the  bonds.  Land  credit  is  based  upon  the 
debenture  bond  and  the  amortization  method  of  pay- 
ment. These  annuities,  sinking  fund,  and  debenture 
bonds  constitute  the  triune  unity  of  practical  land 
credit. 

The  new  Landschaftens  are  of  different  patterns. 
Some  are  mere  annexes  to  the  older  societies,   but 


Markets    and   Rural   Economics  235 

most  are  independent  and  resemble  ordinary  mort- 
gage banks,  except  in  the  essential  point  that  they 
have  no  share  capital  earning  dividends.  They  are 
gratuitous  intermediaries  between  the  outside  capital- 
ists and  the  borrowers,  charging  merely  a  small  com- 
mission to  make  actual  expenses.  These  societies  do 
not  lend  their  own  funds;  the  applicant  for  a  loan 
asks  that  debentures  be  issued  against  a  mortgage  of 
his  property,  consigned  to  the  Landschaftens.  This 
done,  the  debenture  is  marketed,  and  the  funds  se- 
cured for  the  loan.  The  debentures  are  secured  by 
the  whole  mass  of  mortgages  held  by  the  bank  and 
by  all  its  proper  form  of  security,  including  the  prop- 
erty of  the  members,  the  reserve  fund.  A  debenture 
holder  cannot  demand  payment  before  maturity,  but 
the  bank  can  call  them  in  by  giving  six  months'  no- 
tice. The  interest  paid  by  the  borrower  on  the  loan 
is  that  paid  by  the  bank  on  the  debenture.  Loans 
are  payable  almost  entirely  by  amortization.  The 
usual  run  is  for  a  half  century,  but  the  borrower  is 
at  liberty  to  pay  the  whole  or  part  whenever  he  so 
chooses,  but  he  must  pay  the  entire  interest  for  the 
half  year  in  which  he  pays. 

All  the  land  credit  institutions  of  Europe  are  in 
some  way  connected  with  the  government.  This 
applies  to  some  of  the  societies  organized  for  com- 
mercial credit.  In  1895  the  Prussian  government, 
proceeding  on  the  idea  that  credit  institutions  in 
town  and  country  failed  to  place  the  man  of  small 
affairs  on  a  level  with  the  men  of  large  affairs,  as 
regards  banking  facilities,  appropriated  five  million 
marks  (since  made  fifty  million)  on  which  a  3  per 
cent,  rate  of  interest  in  charged,  with  the  object  of 
affording  credit  at  a  uniform  and  low  rate  to  small 


236  Markets    and  Rural   Economics 

purchasers,   industrial   and   agricultural,   provided   a 
proper  association  has  been  organized. 

The  urban  credit  banks  protested  against  govern- 
ment interference,  and  refused  to  be  parties  to  a 
government  aid  coalition,  so  that  six-sevenths  of  the 
government  business  is  done  with  the  agricultural  or- 
ganization. 

THE  GERMAN  MORTGAGE  BANK 

The  mortgage  banks  of  Europe  may  be  classified 
as  public,  quasi-public,  and  strictly  private  institu- 
tions. The  latter  are  all  those  which,  whether  they 
consist  of  lenders  or  borrowers,  operate  under  gen- 
eral laws  and  have  no  special  privileges.  These  com- 
panies in  Germany  have  outstripped  the  older  and 
privileged  banks.  They  had  in  1912  $2,918,- 
000,000  loaned  on  mortgage,  or  five  times  more  than 
the  Landschaftens.  The  capital  is  $170,563,000; 
the  bonds  in  circulation  amount  to  $2,548,009,000, 
with  interest  at  3.5  or  4  per  cent.,  while  the  average 
returns  on  mortgage  loans  are  4.22  to  4.33  per  cent, 
per  annum.  The  supervision  is  carried  out  by  royal 
commissioners  and  extends  to  the  minutest  details. 

In  France 

The  Credit  Fancier  is  the  largest  and  most  com- 
prehensive land  bank  in  the  world.  It  was  formed 
in  18^2,  placed  under  government  control,  given  a 
subsidy,  and  granted  a  monopoly  for  25  years.  The 
monopoly  was  not  renewed,  but  its  special  privileges 
remain,  which  perhaps  accounts  for  its  being  the  only 
land  bank  in  France.  In  that  country  they  do  not 
call  an  institution  lending  money  on  land  a  bank, 
and  the  deposits  it  may  receive  are  limited  by  law. 

The  governor  and  two  sub-governors  of  the  Credit 


Markets    and   Rural   Economics  237 

Fancier  are  appointed  for  life  by  the  president  of 
the  republic.  It  is  subject  to  the  surveillance  of  the 
Treasury  Department  of  the  Government.  Its  mort- 
gage loans,  and  first  loans,  and  titles  must  be  clear 
and  unincumbered.  A  farmer  cannot  bind  himself 
to  pay  a  greater  annuity  than  the  annual  income  of 
the  property  mortgaged.  It  loans  to  municipalities, 
corporations,  communities,  farmers  and  orchardists, 
and  certain  industrial  pursuits,  at  low  percentages  of 
value.  Miners,  quarriers,  theatres,  etc.,  are  excluded. 
The  outstanding  loans  and  the  debenture  issues  must 
exactly  correspond  in  amounts.  It  is  a  limited  liabil- 
ity company.  It  markets  bonds,  or  debentures,  or 
denomination  suitable  for  public  investments,  based 
on  mortgages  limited  to  the  amount  due  from  the 
lender.  In  other  words,  the  Credit  Fancier  acts  as  a 
fiscal  agent  for  the  borrower,  so  that,  instead  of 
seeking  to  raise  money  directly  from  some  local  lender 
by  mortgaging  his  farm,  the  farmer  places  his  mort- 
gage with  the  Credit  Fancier,  which  in  turn  issues 
bonds  based  on  the  mortgage,  and  the  bonds  can  be 
sold  throughout  the  country  just  as  municipal  or  public 
service  corporation  bonds.  The  capital  stock  of  the 
company  must  be  always  maintained  at  the  rates  of 
one-twentieth  or  more  of  the  debentures  in  circula- 
tion. The  shares  of  the  company  are  dealt  in  on 
the  Paris  Bourse  and  may  be  purchased  by  anyone. 
The  capital  in  1912  was  $40,000,000,  divided  into 
400,000  shares  of  $100  each.  The  capital  has  been 
raised  to  $50,000,000.  One-fourth  of  the  capital 
must  be  invested  in  French  rents  or  other  treasury 
bonds;  one-fourth  in  office  buildings  of  the  city  or 
by  loans  to  the  French  colonies,  or  in  securities  de- 
posited with  the  bank  of  France  as  a  guaranty  for 
advances.  The  shares  are  non-assessable  and  cannot 
be  issued  below  par. 


238  Markets    and   Rural   Economics 

In  January,  1912,  the  company  offered  for  public 
subscription  $100,000,000  of  3  per  cent,  debentures 
in  denominations  of  $50  each  and  running  three 
score  and  ten  years.  The  issue  was  subscribed  nine- 
teen times. 

Two  classes  of  loans  are  offered  to  the  farmer: 
short  time  loans  running  from  one  to  nine  years,  and 
long  time  loans  running  from  ten  to  seventy-five  years. 
The  rate  to  the  farmer  is  4.3  per  cent.  On  the  short 
time  loan  the  borrower  pays  only  the  interest  due  at 
the  end  of  each  year,  and  at  the  expiration  of  the 
loan  pays  back  the  principal.  In  the  case  of  long 
time  loans,  the  principal  is  paid  back  in  annuities  to- 
gether with  the  interest  due  at  the  end  of  each  year. 
The  annuities  are  spaced  over  the  period  of  loan. 
Borrowers  have  the  right  to  pay  in  advance,  so  the 
proper  adjustment  of  the  balance  is  beyond  the  con- 
trol of  the  company,  but  as  loans  are  paid  up  deben- 
tures must  be  paid  off.  For  this  reason  the  deben- 
tures, although  calculated  to  be  redeemed  synchron- 
ously with  the  loans  they  represent,  have  no  fixed 
time  for  maturity  and  are  recallable  at  option. 

Credit  Agricole 

The  Credit  Agricole  is  the  name  of  the  Agricul- 
tural Cooperative  Credit  Society  which  lends  on  both 
personal  and  real  security  to  the  farmers  of  France. 
Unlike  the  agricultural  credit  society  system  of  Ger- 
many, which  gradually  evolved  from  small  beginnings 
into  a  complex  system  of  societies,  provincial  unions, 
and  central  banks,  the  French  Credit  Agricole  was 
struck  forth  by  national  fiat,  issuing,  Minerva-like, 
full-fledged  from  legislative  council.  This  was  in 
1899,  and  the  system  has  scarcely  had  a  full  test  of 


Markets    and   Rural   Economics  239 

its   usefulness.      The  policy   of   its  operations   is   to 
discourage   considering   a   savings   deposit   as   an   in- 
vestment.    The  object  is  to  encourage  local  invest- 
ment  rather  than   to   concentrate   deposits   in   local 
banks  to  be  redeposited  in  corespondent  banks  to  be 
redeposited  in  reserve  city  banks  to  be  loaned  on  spec- 
ulative  deals   and  cause   inflation   in  certain  centers 
and  contraction  in  other  parts  of^the  country.     The 
groundwork  of  this  system  consists  of  a  number  of 
individual  societies  assuming  either  limited  or  unlim- 
ited liability  for  the  funds  secured.     Each  member 
takes  one  or  more  shares  of  20  francs.    Each  society, 
when  it  is  founded,  makes  over  the  whole  of  its  capi- 
tal to  the  central  bank  of  the  department  in  which  it 
is  located.     These  central  banks  are  established  by 
the  State.     They  are  under  the  control  of  the  Credit 
Agricole,   which   inspects   them   and   to   which   they 
make  their  reports.     The  Bank  of  France  lends  them 
without  interest  f40, 000,000,  and  certain  other  funds 
are    dispensed   through   the   channel   of   the   central 
banks.     The  central  banks  or  "regionale"  banks  re- 
ceive their  capital  from  the  local  banks,  and  as  soon 
as  that  is  made  over  to  them  they  are  entitled  to  a 
loan   free  of  interest   from  the   State  of  five  times 
the  amount  subscribed.      From  these   funds  the   re- 
gional banks  lend  to  the  local  offices  at  3  per  cent., 
and  the  local  offices  lend  to  their  members  at  3.5 
to  4  per  cent,  on  short  loans;  long  time  loans  run 
from  2  per  cent,  to  3%  per  cent.     The  process  of 
negotiating  loans  is  as  follows:     An  application  for 
a  loan  is  made  by  a  member  of  a  local  bank;  it  is 
considered  by  the   "conseil"  or  administrative  com- 
mittee of  the  local  bank — the  committee  is  elected  by 
the  members;  if  approved  the  application  is  then  sub- 
mitted to  the  committee  of  the  local  bank — which  is 


240  Markets    and  Rural   Economics 

elected  by  the  representatives  of  the  local  banks  in 
its  district;  if  the  loan  is  granted,  the  applicant  draws 
a  bill  on  himself  for  the  amount.  This  bill  is  then 
indorsed  on  behalf  of  the  local  society  and  discounted 
at  the  central  office.  Should  the  latter  not  have  suf- 
ficient funds  for  the  purpose,  it  can  reindorse  the  bill 
and  it  can  then  be  rediscounted  with  the  Bank  of 
France,  leaving  no  profits  for  the  branch  office.  So 
they  are  not  limited  to  the  original  loan  of  the  gov- 
ernment. 

Loans  are  granted  solely  for  agricultural  purposes. 
They  have  about  3,000  local  offices  with  an  average 
membership  of  40,  and  the  average  credit  is  about 
500  francs. 

The  credit  societies  of  all  countries  wherever  or- 
ganized have  furnished  the  members  with  the  cash 
to  pay  for  supplies,  and  thereby  obviated  the  neces- 
sity and  minimized  the  habit  of  going  on  a  credit  and 
running  accounts  at  expensive  rates  at  the  stores.  In 
France  the  underlying  form  of  the  association  which 
furnishes  the  business  and  social  source  of  coopera- 
tive effort  is  the  "syndicat,"  which  conducts  the  busi- 
ness of  supply  and  sale.  The  credit  banks  stand  in 
the  same  relation  to  the  syndicates  as  do  the  pro- 
ductive societies.  The  syndicates  are  of  two  kinds: 
those  with  a  general  purpose  and  those  with  a  special 
purpose.  They  are  educational  and  furnish  the  means 
of  mobilizing  farmers  into  effective  business  organi- 
zations. 

LESSON  XXXVI 

When  and  where  did  the  different  credit  banks 
have  their  origin? 


Markets    and  Rural   Economics  241 

What  was  the  immediate  prompting  cause  of  these 
organizations? 

Who  took  the  initiative?     How  did  they  proceed? 

What  can  you  say  of  the  growth  of  these  credit 
banks  ? 

What  changes  in  the  laws  governing  cooperative 
banks  ? 

How  are  they  governed  in  the  voting  power  of 
members? 

What  are  the  distinctive  features  of  the  bank  of 
England? 

What  kinds  of  liability  do  the  laws  of  Germany 
permit? 

Give  the  origin  of  the  Damnstadt  Federation. 

What  are  the  sources  of  funds  of  the  credit  banks? 

What  percentage  is  secured  from  each  source? 

Give  the  different  kinds  of  rural  banks. 

What  can  you  say  of  the  Raiffiesen  bank  buildings? 

What  part  has  the  government  played  in  the  deal- 
ings of  the  banks? 

What  can  you  say  of  the  spread  of  the  credit 
banking  system? 

What  are  the  time  limits  and  rates? 

LESSON  XXXVII 

In  what  features  do  Schulze-Delitzsch  banks  re- 
semble ordinary  commercial  banks? 

In  what  way  do  they  differ  from  ordinary  banks? 

What  classes  use  the  Schulze-Delitzsch  banks? 

Where  do  the  borrowers  on  land  go  for  money? 

State  the  details  of  the  Landschaften  banking  sys- 
tem. 

What  is  the  difference  between  the  new  Land- 
schaften and  the  old  Landschaften  system? 


242  Markets    and   Rural   Economics 

What  is  the  relationship  of  the  government  to  the 
land  credit  banks? 

^  State  the  facts  regarding  the  mortgage  banks  of 
Germany. 

How  do  you  account  for  the  fact  that  they  are 
outstripping  the  Landschaften  banks? 

Do  they  deal  with  the  individual  farmer  or  with 
groups  of  farmers? 

What  are  their  time  limits  and  rates? 

LESSON  XXXVIII 

What  is  the  Credit  Fancier  of  France  ? 

When  and  how  was  it  organized? 

What  is  the  system  of  organization? 

What  securities  does  it  accept? 

What  is  the  process  of  securing  the  money  and 
getting  it  to  the  borrower? 

What  are  the  time  limits  and  rates? 

What  is  the  Credit  Agricole  ? 

When  and  how  was  it  organized? 

What  is  the  policy  regarding  savings  deposits? 

Give  the  structure  of  the  system. 

What  is  the  relationship  of  the  individual  to  the 
local  society? 

What  is  the  relationship  of  the  local  society  with 
the  regional  banks? 

What  is  the  relationship  of  the  regional  banks 
with  the  government? 

What  security  do  they  accept? 

How  is  the  money  secured?     From  what  sources? 

What  is  a  "syndicat"? 

What  has  been  the  general  effect  of  credit  societies? 

What  is  the  uopen  account"  as  applied  to  com- 
mercial banking  generally? 


Markets    and   Rural   Economics  243 

In  what  way  does  it  help  the  borrower? 

What  can  you  say  as  to  the  use  of  the  open  ao 
count  by  farmers  and  by  those  engaged  in  commer 
cial  pursuits? 


CHAPTER  XXVII 
OUR  BANKING  AND  CURRENCY  SYSTEM 

There  is  no  agency  for  good  or  evil  that  is  so  vital 
in  its  direct  influence  on  the  welfare  of  the  citizens 
of  a  country  as  that  of  the  Government's  financial 
system.  Nothing  so  intimately  concerns  the  indus- 
try, economy,  and  markets  of  a  country  as  its  cur- 
rency, banking,  and  credit  systems. 

Among  the  faults  of  our  monetary  system  which 
we  inherited  from  the  Civil  War  may  be  mentioned 
the  following: 

1.  Insecurity. 

2.  Tendency  to  concentrate — to  encourage  spec- 
ulation, voting  trusts,   and  interlocking  directorates. 

3.  Inelasticity:  bred  panics. 

4.  Inadequate  provisions  for  time  exchange. 

5.  Lack   of   coordination    and   uniformity — non- 
cooperative. 

6.  Narrowness  of  market  for  commercial  paper. 

7.  Volume  of  money  depended  on  national  debt. 

8.  Did  not  provide  for  foreign  markets. 

9.  Inadequate  provisions  for  land  loans. 

10.  Improper  use  of  the  postal  savings  deposits. 

11.  Allows    clearing    houses    to    operate    without 
Government   supervision;   prescribe    arbitrarily  both 
the  loan  rates  and  interest  rates  of  their  members; 
refusal  to  "clear"  for  any  banking  house  they  care 
to  exclude;  and  issue  receipts  to  pass  as  money  in 
open  violation  of  law. 


Markets    and   Rural   Economics  245 

The  stupendous  total  of  about  $1,000,000,000  are 
the  liabilities  of  failed  banks  of  the  United  States 
since  the  Civil  War.  Of  these  the  national  bank 
failures  involved  capital,  surplus,  and  other  liabili- 
ties to  the  aggregate  of  $350,000,000,  of  which  total 
only  $120,000,000  were  made  good.  The  State 
and  private  banks  for  the  same  period  show  failures 
of  $660,000,000.  The  failed  national  banks  netted 
their  creditors  76  per  cent,  of  the  stock — the  stock- 
holders losing  all  their  capital  and  being  assessed 
$20,000,000  besides.  Many  private  bank  failures 
are  not  included  in  these  statistics.  During  the  last 
score  of  years  we  have  averaged  a  full  week  of 
bank  failures  every  month. 

That  money  and  financial  power  had  become  cen- 
tralized was  taken  as  a  matter  of  fact. 

Money  is  that  with  which  the  debtor  can  extin- 
guish his  debt  without  the  consent  of  the  creditor  at 
a  fixed  unit  of  account.  Redemption  money  is  a 
commodity  stamped  with  government  fiat  and  used 
to  redeem  credit  money.  Currency  which  the  gov- 
ernment pledges  to  redeem  in  metal  stamped  with 
government  fiat  is  credit  money.  Paper  money  is- 
sued in  excess  of  the  amount  of  redemption  money 
is  uncovered  paper.  Money  in  the  treasury  not  cov- 
ered by  appropriations  is  uncovered  money.  Money 
which  the  government  will  accept  for  debts,  dues  and 
demands  of  the  government  is  receivable  money. 

Our  moneys  are  of  the  following  kinds  and 
amounts:  Of  gold  coin,  $614,478,201;  of  standard 
silver  dollars,  $74,012,152;  of  subsidiary  silver, 
$160,486,188;  of  gold  certificates,  $480,079,731;  of 
Treasury  notes  of  1890,  $2,583,874;  of  United 
States  Notes,  that  is,  greenbacks,  $341,401,413;  and 


246  Markets    and   Rural   Economics 

the  ist  of  November,   1913,  $3,417,109,678. 

In  this  enumeration  of  the  kinds  of  money  the 
Government  appears  as  having  issued,  not  including 
gold  certificates — which  really  represent  gold  depos- 
its, and  are  a  trust  fund  against  the  certificates — the 
Government  appears  as  having  issued  its  paper,  prac- 
tically its  promises  to  pay,  of  greenbacks,  $304,401,- 
413;  of  Treasury  notes  of  1890,  $2,583,874;  and  of 
silver  certificates  against  the  silver  on  deposit,  $480,- 
079,731,  making  a  total  of  $824,074,118  of  Gov- 
ernment obligations.  Against  that  the  Government 
had  of  gold  reserves  $150,000,000  and  of  silver 
deposited,  upon  which  it  had  issued  certificates,  which 
the  Government  is  under  obligations  to  keep  on  a 
parity  with  gold,  and  which  is,  speaking  roughly, 
worth  about  one-half  of  gold,  $480,079,739.  One- 
half  of  that  silver  being  security  of  reserve  against 
the  silver  certificates.  So  that,  as  against  this  $824,- 
074,118  of  its  demand  obligations,  the  Government 
has  in  reserve  in  gold  and  silver  value  $391,331,000. 

The  new  banking  and  currency  law  provides  for 
increasing  the  amount  of  $824,064,118  of  demand 
obligations  of  the  Government  by  the  issue  of  further 
obligations.  It  provides  that  the  Government,  in 
issuing  these  notes  and  advancing  them  to  the  reserve 
banks,  shall  take  security  from  the  banks,  and  the 
banks  shall  hold  in  their  vaults  as  applicable  to  mak- 
ing good  to  the  Government  convertible  securities 
and  cash.  The  reserve  is  to  be  35  per  cent,  and  it  is 
required  that  at  least  33  1-3  per  cent,  of  that  amount 
of  notes  issued  to  the  banks  shall  be  based  on  gold. 

The  new  banking  and  currency  law  revolutionizes 
our  banking  and  currency  system  for  the  better.  It 
has  within  it  many  of  the  fundamentals  which  were 


Markets    and   Rural   Economics  247 

for  years  denounced  and  belittled  by  the  dominant 
financial  authorities  of  the  country.  The  central  prin- 
ciples that  gave  vitality  to  the  old  Greenback  party 
under  the  leadership  of  Peter  Cooper,  Gen.  Benj. 
Butler  and  Gen.  James  B.  Weaver,  and  later  to 
certain  Alliance  demands,  and  later  still  to  the  free 
silver  crusade,  are  embodied  in  this  law.  The  prin- 
ciples were  not  applied  as  those  movements  endeav- 
ored to  apply  them;  but  the  principle  that  the  Gov- 
ernment rather  than  private  corporations  should  is- 
sue all  the  money  and  regulate  the  supply  sits  regnant 
at  the  heart  of  the  new  law;  also  the  abolition  of 
bank  currency  based  on  the  national  debt  represented 
by  national  bonds.  A  bitter  fight  was  waged  over 
these  and  other  features  of  the  bill  as  it  wended  its 
way  through  the  House  and  Senate. 

One  of  the  pivotal  points  was  that  of  control  and 
ownership.  The  larger  banks  usually  contended  for 
ownership  and  control  by  the  national  banks  exclusive- 
ly. To  make  an  immense  business  subject  to  the 
dictation  of  those  not  directly  interested  in  it  was 
to  them  rank  financial  heresy.  The  other  extreme 
was  represented  by  those  who  contended  that  it  should 
be  controlled  by  those  totally  disconnected  in  every 
way  with  banking,  just  as  a  judge  should  be  in  no 
way  connected  with  the  parties  in  court.  The  re- 
sult was  a  compromise — which  is  the  usual  way  with 
legislation.  There  were  three  bills  finally  formulated 
and  urged  for  passage :  The  bill  as  it  passed  the 
House,  the  bill  as  amended  by  the  Democratic  mem- 
bers of  the  Senate,  and  the  bill  as  amended  by  the 
Republican  members  of  the  Senate.  All  three  of  them 
contemplated  the  abolition  of  the  banking  system  we 
had  maintained  for  half  a  century,  and  the  estab- 


248  Markets    and  Rural   Economics 

lishment  of  a  system  of  regional  or  federal  reserve 
banks;  the  issuance  of  currency  by  the  government 
through  these  district  federal  reserve  banks  on  "prime 
commercial  paper";  these  banks  of  issue  to  hold  re- 
serve behind  their  deposits  and  note  issues  at  certain 
ratios;  they  to  rediscount  the  paper  of  member  banks 
and  the  whole  system  to  be  under  the  control  of  a 
federal  board  of  control,  a  part  of  which  was  to  be 
appointed  by  the  President.  However  the  bills  dif- 
fered on  almost  every  point  as  to  the  means  to  be 
provided  to  carry  out  these  purposes. 

Out  of  many  instances  proved  in  the  Pujo  in- 
vestigation it  was  shown  that  the  firm  members  and 
directors  of  two  banks  and  trust  companies,  controlled 
by  the  Standard  Oil  and  Morgan  federation,  together 
held  118  directorships  in  34  banks,  and  30  director- 
ships in  ten  insurance  companies,  with  resources,  de- 
posits and  assets  aggregating  nearly  $7,000,000,000. 
In  the  Senate  the  following  amendment  was  offered : 
"No  member  of  the  federal  reserve  board,  and  no 
director  of  a  federal  reserve  bank  and  no  officer  or 
director  of  any  member  bank  shall  be  an  officer,  di- 
rector or  stockholder  of  any  other  bank,  trust  com- 
pany, or  insurance  company."  Result:  ayes,  28  Rep., 
2  Dem.  Nos.,  43  Dem.,  8  Rep. 

The  law  as  passed  gives  the  banks  first  chance  to 
acquire  all  the  stock  in  the  federal  reserve  banks,  and 
gives  the  banks  six  and  the  government  three  of  the 
nine  directors  of  each  reserve  bank.  All  efforts  to 
provide  for  public  ownership  of  the  stock  of  the  re- 
serve banks,  and  providing  that  the  Government 
should  name  a  majority  of  the  directors  ->f  each  re- 
serve bank,  were  unsuccessful. 

As  "prime  commercial  paper"  was  to  be  discounted 


Markets   and   Rural  Economics  249 

at  the  reserve  banks  for  the  member  banks,  quite  a 
discussion  at  once  arose  as  to  what  should  be  included 
under  this  term.  It  was  only  after  a  hard  fight  in  the 
Banking  and  Currency  committee  of  the  House,  led 
by  Henry  of  Texas,  Neely  of  Kansas,  and  Ragsdale 
of  South  Carolina,  that  paper  based  on  the  dynamic 
wealth  of  the  farm — non-perishable  crops  on  the  way 
to  market — was  definitely  named  as  coming  under  the 
list  of  acceptable  securities. 

With  the  commercial  banks  the  question  hinged 
upon  what  on  its  face  appears  to  be  a  mere  matter 
of  form.  Shall  the  reserve  banks  recognize  and 
rediscount  for  the  banks  the  common  promissory 
notes,  which  a  merchant  makes  and  discounts  with 
his  local  banker,  when  he  desires  to  buy  goods,  or 
shall  it  be  the  "prime  bill"  or  the  "acceptance"  which 
is  used  in  less  than  three  per  cent,  of  credit  transac- 
tions in  the  United  States  (although  it  is  the  rule  in 
Europe),  and  which  represents  credit  extended  at 
the  other  end  of  wholesale  merchandising,  being  ne- 
gotiated by  the  jobber  or  wholesaler  instead  of  by  the 
retailer?  So  that  either  the  great  turnover  trade 
shall  be  supported  by  credit  extended  by  the  local 
banks  to  retailers  upon  the  local  bankers'  judgment 
of  the  character  and  responsibility  of  the  merchants, 
or  that  the  wholesalers  and  jobbers  should  have  to 
assume  responsibility  for  the  merchants  to  whom  they 
sell  goods,  and  negotiate  for  necessary  credit  with 
the  larger  city  banks.  It  was  a  question  calling  for  a 
ruling  from  the  federal  reserve  board. 

Ours  is  a  composite  system  of  finance  gradually 
developed,  and  reflecting  features  of  various  Euro- 
pean systems,  but  better  adapted  to  American  needs 
than  any  other  we  have  ever  had,  and  superior  as  a 
compact  organic  whole  to  that  of  any  other  country. 


250  Markets    and   Rural   Economics 

We  have  the  central  bank  idea  exemplified  in  Ger- 
many, France,  Russia,  and  England.  They  are  pri- 
vately owned  but  under  the  control  of  the  govern- 
ments. 

The  writer's  views  as  written  before  the  Federal 
Reserve  Act  was  drafted  were  as  follows: 

Our  financial  legislation  should  accomplish  the  fol- 
lowing ends: 

1.  Prevent  a  money  trust. 

2.  Prevent  financial  panics. 

3.  Uniform   treatment   of   discounts   with    inde- 
pendence of  individual  banks. 

4.  Elasticity  of  supply  adjusted  to  seasonal  de- 
mands, but  not  for  exchange  speculation. 

5.  Elasticity  of  reserves  and  absolute  security  of 
deposits. 

6.  Abolition  of  holding  companies  in  the  banking 
business. 

7.  Authorization  of  national  banks  to  do   (i)    a 
commercial  banking   business,    (2)    a    savings   bank 
business,   (3)   a  trust  company  business — the  various 
accounts  to  be  segregated. 

8.  The   cooperation   of  all  banks   through   zone 
clearing  houses,   incorporated  and  under  the  super- 
vision of  the  national  government — the  same  to  be 
clearing  centers  for  their  respective  banking  units. 

9.  A  free  check  system  among  the  banks  of  each 
clearing-house  zone  as  a  banking  unit. 

10.  Provide   for  acceptance  of  time  bills  of  ex- 
change  to   create   a   discount   market   at   home   and 
abroad. 

IT.  Secure  better  banking  facilities  with  other 
countries  to  aid  in  extending  foreign  trade. 

12.  Furnish  the  means  of  investing  savings  in 
convertible  securities  instead  of  depositing  in  Savings 


Markets    and  Rural   Economics  251 

banks  or  investing  in  foreign  securities,  and  to  ac- 
commodate small  amounts  for  investment  as  well  as 
large  amounts. 

13.  Provide  for  land  banks,  to  issue  non-taxable 
bonds  secured  by  real  estate  leasehold  or  mortgage 
upon  improved  lands  occupied  by  the  owner. 

14.  Needed  changes  in  our  postal  savings  bank 
laws  to  avoid  concentrating  deposits  out  of  district  in 
which  they  are  deposited. 

15.  Abolition  of  all  banknotes  based  on  national 
bonds. 

1 6.  All  money  to  be  a  full  legal  tender  for  all 
debts,  public  and  private,  and  receivable  for  all  debts, 
dues  and  demands  of  the  government. 

17.  Gold,  silver,  and  their  certificates,  and  treas- 
ury notes,  subsidiary  and  minor  coins  to  constitute  all 
varieties  of  money. 

1 8.  International     check,      interchangeable      for 
money  in  any  country. 

BANKING  SYSTEM  OF  THE  UNITED  STATES,  1913 

i- 1     Definition:     A  system  established  for  the  cus- 
tody,  loan  exchange,   and  issue 
of    money;     and    to    facilitate 
credit  and  commercial  exchange. 
2-1     Explication: 

1-2     Kinds  of  banks, 
1-3     National  Banks, 

1-4     Those  that  issue  money; 
2-4     Those  that  do  not; 
2-3     State  banks; 
3-3      Private  banks. 
2-2     Powers  and  privileges  : 
1-3     Of  National  banks — 
1-4     To  issue  money, 


252  Markets   and   Rural   Economics 

2-4     To  rediscount, 

3-4     To  receive  deposits, 

5-4     To  buy  and  sell  gold  and  silver  bul- 
lion, bills  of  exchange,  etc. 
4-4     To  make  loans  on  any  security  except 

real  estate. 
2-3      Of  State  banks. 
1-4     To  rediscount, 
2-4     To  receive  deposits, 
3-4     To  make  loans  on  any  kind  of  security. 
3-3     Of  Private  banks.     Powers  unlimited — 
except  not  allowed  to  issue  notes. 

MONETARY  SYSTEM  OF  THE  UNITED  STATES,  1913 

i- 1      Definition:     A  system  by  which  the  Govern- 
ment issues  and  regulates  a  cir- 
culating medium. 
2-1      Explication: 

1-2      Kinds  of  money — 
1-3      Gold, 

2-3     Gold  certificates, 
3-3     Silver, 
4-3      Silver  certificates, 
5-3     Nickel, 
6-3     Copper, 

7-3      Treasury  notes;  two  kinds, 
8-3      Greenback, 
9-3      Bank  notes. 
2-2     Quantity  of  money — 

1-3  All  kinds,  according  to  Comptroller  of 
Currency,  $3,720,000,000,  June  30, 
1913. 

1-4     Gold  coin,  $614,478,201;  Gold  certifi- 
cates, $1,021,457,879,  November   i, 


Markets    and   Rural   Economics  253 

2-4  Silver  dollars,  $74,012,052;  Silver  cer- 
tificates, $480,079,731; 

3-4     Subsidiary  coin,  $160,486,188; 

4-4     Treasury  notes,  1890,  $82,583,874; 

5-4     Greenback,  $341,401,413; 

6-4     Bank  notes,  $722,615,240; 

(Total  $3,417, 109, 678.) 
3-2      Quality  of  money: 
1-3     Legal  tender — 

1-4  Gold  coin,  at  its  nominal  or  face  value 
for  all  debts,  public  and  private,  when 
not  below  the  standard  weight  and 
limit  of  tolerance  prescribed  by  law; 
and  when  below  such  standard  and 
limit  of  tolerance  it  is  legal  tender  in 
proportion  to  its  weight. 

2-4  Standard  silver  dollars,  at  their  nominal 
or  face  value  in  payment  of  all  debts, 
public  and  private,  without  regard  to 
the  amount,  except  where  otherwise 
expressly  stipulated  in  the  contract. 
2-3  Limited  legal  tender — 

1-4  Subsidiary  silver,  for  amounts  not  ex- 
ceeding $10  in  any  one  payment. 

2-4  Treasury  notes  of  the  act  of  July  14, 
1890,  are  legal  tender  for  all  debts 
public  and  private,  except  where  other- 
wise expressly  stipulated  in  the  con- 
tract. 

3-4  United  States  notes,  for  all  debts  pub- 
lic and  private,  except  duties  on  im- 
ports and  interest  on  the  public  debt. 

4-4     The  minor  coins  of  nickel  and  copper, 

to  the  extent  of  25  cents. 
3-3     Non-legal  tender — 


254  Markets    and  Rural   Economics 

1-4  Gold  certificates,  silver  certificates,  and 
national-bank  notes,  but  both  classes 
of  certificates  are  receivable  for  all 
public  dues,  while  national-bank  notes 
are  receivable  for  all  public  dues  ex- 
cept duties  on  imports,  and  may  be 
paid  out  by  the  Government  for  all 
salaries  and  other  debts  and  demands 
owing  by  the  United  States  to  in- 
dividuals, corporations,  and  associa- 
tions within  the  U.  S.,  except 
interest  on  the  public  debt  and 
in  redemption  of  the  national  cur- 
rency. All  national  banks  are  required 
by  law  to  receive  the  notes  of  other 
national  banks  at  par. 
2-4  Foreign  coins. 

FEDERAL  RESERVE  ACT 

i-i      Definition:     An  act  providing  for  mobility  and 
elasticity  of  currency  to   facili- 
tate commercial,  industrial  and 
agricultural  transactions. 
2-1      Explication: 

1-2      Federal  Reserve  District. 
1-3     Number — 

1-4     Not  less  than  eight. 
2-4     Not  more  than  12. 
2-3     Amount  of  business  determines  district. 
2-2      Federal  Reserve  Advisory  Council. 
1-3      Membership — 

1-4     One  councilman  from  each  Reserve  Dis- 
trict. 

2-4     Elected  by  Directors  of  Reserve  Board. 
2-3      Powers — 

1-4     Meet  four  times  annually. 


Markets    and   Rural   Economics  255 

2-4     Confer  with  Federal  Reserve  Board; 
3-4     To  make  representations  on  matters  in 

jurisdiction  of  Reserve  Board. 
4-4     To    call    for    information,    and    make 

recommendation  on — 
1-5      Discount  rates; 
2-5      Note  issue; 
3-5      Reserves 

3-2     FEDERAL  RESERVE  BOARD: 
1-3      Members — 

1-4  Secretary  of  the  Treasury, 
2-4  Comptroller  of  Currency. 
3-4  Five  appointees  of  the  President  of  the 

United  States. 
2-3      Powers — 

1-4     To  examine  books,  and  publish  statements 

of  Reserve*  and  Member-bank. 
2-4     To  permit  or  require  one  Federal  Reserve 

Bank  to  rediscount  paper  of  another. 
3-4     To  suspend  reserve  requirements — 
1-5      For  30  days, 
^-5      For  renewal  of  15  days, 
3-5     To  fix  a  tax  upon  reserve   falls  below 

requirements. 

4-4     To  supervise  and  regulate  issue  and  retire- 
ment of  notes; 

5-4     To  add  to  number  of  reserve  city,  and  cen- 
tral reserve  city  banks  ;t 


*The  terms,  "Federal  Reserve  Bank,"  "Regional  Reserve 
Bank,"  and  "Zone  Bank,"  used  in  this  work  are  held  to  be 
synonymous  and  interchangeable. 

tThere  are  three  central  reserve  cities  and  forty-eight  reserve 
cities. 


256  Markets    and  Rural   Economics 

6-4     To  suspend  or  remove  officers  of  Federal 

Reserve  Bank. 
7-4     To  require  the  writing  oft  the  books  of 

worthless  accounts; 
8-4     To  suspend  operations  of  Federal  Reserve 

Bank  for  violation  of  rules; 
9-4     To    require    bonds    of    Federal    Reserve 

Agents ; 

10-4     To  supervise  Federal  Reserve  Banks. 
11-4     To  grant  National  banks  right  to  become 

trustees,  administrators,  etc. 

12-4     To  employ  Attorneys,  experts,  etc.,  to  con- 
duct business  of  Board. 
4-2     FEDERAL  RESERVE  BANKS  : 
1-3      Organization — 

1-4     Name  includes  name  of  city  where  located. 
(Note     as     Federal     Reserve     Bank     of 

Chicago.) 

2-4     Five  eligible  banks,   selected  by  Reserve 
Board,  may  organize  a  Federal  Reserve 
Bank. 
3-4     Members  and  stockholders — 

1-5      Membership    required  of   all  National 

banks. 

2-5     All    eligible    authorized    to    apply    for 
membership. 

(Note:  Any  bank  that  has  sufficient 
paid-up  capital  to  become  a  National 
bank  is  eligible.) 

3-5  If  member  banks  are  unable  to  hold 
enough  stock  to  operate  a  Federal  Re- 
serve Bank; 

1-6     Stock,  to  the  limit  of  $2^,000  to  each 
purchaser,  may  be  sold  to  public. 


Markets    and   Rural   Economics  257 

2-6  (If  stock  still  insufficient  to  operate 
bank)  Stock  may  be  allotted  to 
United  States,  and  paid  for  at  par 
out  of  U.  S.  Treasury. 

4-5      Stock  not  held  by  member  banks  car- 
ries no  voting  power. 

5-5      Stockholders  are  responsible  for  amount 
of  stock  at  par  plus  purchase  price  of 
same. 
4-4     Capitalization — 

1-5      Minimum  capital,  $4,000,000. 
2-5      Member  banks  must  take  stock   (to  be 
paid  for  in  gold  or  gold  certificates) 
to  the  amount  of  6  per  cent,  of  their 
capital  and  surplus. 
5-4     Powers  and  Privileges — 

1-5     To  adopt  and  use  corporate  seal; 
2-5     To  have  succession  for  20  years; 
3-5     To  make  contracts; 
4-5     To  sue  and  be  sued;  complain  and  de- 
fend in  courts; 
5-5     To  appoint  officers  and  employees  not 

specified  by  act; 
6-5      To  make  by-laws; 

7-5      To  do  banking  within  prescribed  limits; 
8-5     To  deposit  bonds  and  receive  blank  cir- 
culating notes ; 
9-5     To  receive  deposits  from  member  banks 

and  U.  S.  Government; 

10-5  To  discount  notes,  drafts,  and  bills  of 
exchange  of  commercial,  and  indus- 
trial transactions  of  go-day  maturity; 
11-5  To  discount  bills  of  exchange  based  on 
agricultural  transactions,  or  live  stock, 
6  months  before  maturity.  (To  a 


258  Markets    and  Rural   Economics 

limited  per  cent,  of  capital  stock,  fixed 
by  Federal  Reserve  board.) 
12-5     To   discount   acceptances  based  on   ex- 
ports and  imports; 

13-5  To  buy  and  sell  cable  transfers,  bankers' 
acceptances,  bills  of  exchange  eligible 
for  discount  in  Federal  Reserve 
Banks. 

14-5      To  deal  in  gold  coin  or  bullion; 
15-5      To  buy  and  sell  bonds,  notes,  revenue 

bonds  and  warrants  of  U.  S. 
16-5     To  purchase  from  member  banks,  bills 

of  exchange; 

17-5     To  act  as  fiscal  agent  for  Government. 
6-4     Management;  Board  of  9  Directors; 
1-5     Three  directors  representing  stockhold- 

holding  banks; 

2-5      Three    directors    representing    agricul- 
tural or  other  industrial  pursuits: 
3-5     Three  directors  elected  by  Federal  Re- 
serve Board. 

7-4     Reserves    (Federal  Reserve  Bank.) 
T~5     35  Per  cent.  against  the  deposits; 
2-5      40  per  cent,  against  notes  in  circulation; 
8-4     Division  on  Earnings — 

1-5      Six  per  cent,  per  annum  dividend,   on 

paid  in  stock,  to  stockholders; 
2-5      One-half  of  other  earnings  paid  to  sur- 
plus until  it  is  40  per  cent,  of  paid-in 
capital  stock; 
3-5      Rest  of  earnings  paid  to  U.  S.  Govt. 

as  Franchise  Tax. 

9-4     Federal  Reserve  Bank  Examinations : 
1-5      Comptroller   of    currency    appoints    ex- 
aminer; 


Markets    and   Rural   Economics  259 

2-5      Examines  bank  once  each  year. 
3-5      On    application    of    10    member   banks 
Federal    Reserve    Board    may    order 
special  examination. 
10-4     Branch  offices — 

1-5      Federal  Reserve  Banks  may  establish  in 

its  district; 
2-5      Management — 7  Directors : 

1-6     Four   directors    selected   by    Federal 

Reserve  Bank; 
2-6     Three  directors  selected  by  Federal 

Reserve  Board. 
5-2     MEMBER  BANKS 
1-3      Reserves — 

1-4     Banks  not   in   reserve   or  central   reserve 

city — 

1-5      Must  hold  12  per  cent,  of  demand  de- 
posits;* 

2-5      Must  hold  5  per  cent,  of  time  deposits.* 
3-5     One-third   of    reserves    to    be    held    in 

member  banks  own  vaults; 
4-5      Five-twelfths    of  reserves  to  be  held  in 

Federal  Reserve  Banks; 

6-5      Remainder  at  option  of  member  bank. 
2-4     Reserve  City  Banks  must  hold-in  reserve — 
1-5      15  per  cent,  of  demand  deposits; 
2-5      5  per  cent,  of  time  deposits; 
3-5      One-third  in  its  own  vaults; 
4-5      Two-fifths  in  Federal  Reserve  Bank; 
5-5      Remainder  optional. 


*Demand  deposits  within  the  meaning  of  this  act 
comprise  all  deposits  payable  within  30  days ;  and  time  deposits, 
all  deposits  payable  after  30  days. 


260  Markets    and  Rural   Economics 

3-4     Central  Reserve  City  Banks  must  hold  in 

reserve — 

1-5      1 8  per  cent,  of  demand  deposits; 
2-5      5  per  cent,  of  time  deposits; 
3-5      One-third  of  this  reserve  to  be  held  in 

its  own  vaults; 
4-5     Seven-eighteenths   in    Federal    Reserve 

Bank; 

5-5      Remainder  Optional. 
2-3     Loans  on  Farm  Lands — 
1-4     To  run  not  more  than  5  years. 
2-4     Limited  to  not  more  than  50  per  cent,  of 

land  values; 

3-4     Such  loans  not  to  exceed  25  per  cent,  of 
demand  deposits,   or  one-third  of  time 
deposits  of  bank. 
3-3      Examinations : 

1-4     Comptroller  of  Currency  appoints  exam- 
iners; 

2-4     Must  be  examined  twice  each  year. 
3-4     Federal  Reserve  Bank,  with  approval  of 
Federal  Reserve  Board,  may  order  spe- 
cial examination  of  member  bank  at  any 
time. 

4-3     Foreign  Branches — 
1-4     Any  National  bank  with  $1,000,000  capital 

may  establish  a  foreign  branch; 
2-4     Foreign  Branch  will  be  fiscal  agent  of  the 
U.  S.  Government. 


Markets   and   Rural   Economics 


261 


PER  CAPITA  OF  MONEY  IN  THE  PRINCIPAL 

COUNTRIES  OF  THE  WORLD 

Taken  from  Report  of  Comptroller  of  the 

Currency  for  year  1911 


Uncoverec 

1 

Per  ( 

Capita 

Countries 

Paper 

Gold 

Silver 

Paper 

Total 

United    States     

.     $784,600 

$18.35 

$7.83 

$8.41 

$34.59 

Austria    Hungaria     .  .  . 

.       143,500 

7.07 

2.56 

2.84 

12.47 

Belgium      

.       135,300 

3.33 

2.05 

18.53 

23.91 

British   Empire  : 

Australia     

46.30 

2.33 

46.63 

Canada     

76,800 

17.45 

1.08 

12.39 

30.92 

United    Kingdom     .  . 

.       115,200 

14.44 

2.60 

2.56 

19.60 

India     

38,900 

0.05 

0.49 

0.13 

0.67 

South    Africa    

8.38 

2.56 

10.94 

*Straits    Settlements     . 

7,500 

1.37 

23.44 

4.69 

29.50 

Bulgaria     

9,800 

1.53 

1.20 

2.45 

5.18 

Cuba      

20.00 

2.38 

22.38 

Denmark     

13,500 

14.04 

2.96 

5.00 

22.00 

Egypt     

6,700 

16.19 

1.40 

0.59 

18.18 

Finland     

11,500 

2.45 

0.17 

3.96 

6.58 

France     

.       223,000 

23.67 

10.47 

5.67 

39.71 

Germany     

.       276,100 

2.93 

3.83 

4.34 

11.10 

Greece      

24,600 

8.31 

1.15 

9.46 

18.92 

Haiti     

8,200 

0.87 

1.67 

5.46 

8.00 

Italy     :... 

.       182,300 

7.79 

0.71 

5.38 

13.88 

Japan     

89,300 

1.36 

2.36 

1.69 

5.41 

Mexico     

51,200 

2.10 

4.12 

3.76 

9.98 

Netherlands     

60,300 

11.97 

5.74 

10.39 

28.10 

Norway     

5,400 

6.00 

1.48 

2.35 

9.83 

Portugal     

72,600 

1.59 

6.89 

13.44 

21.92 

Roumania     

38,100 

2.90 

0.03 

5.60 

8.53 

Russia     

6.24 

0.51 

6.75 

Servia     

5,300 

1.82 

0.54 

1.89 

4.25 

Siam     

2,100 

0.01 

7.06 

0.30 

7.36 

South  American  States: 

Argentina     

.      487,800 

36.21 

1.34 

69.69 

107.24 

Bolivia     

4,000 

1.09 

0.22 

1.73 

3.04 

Brazil      

4.80 

1.22 

6.02 

Chile     

53,400 

0.15 

0.80 

15.26 

16.20 

Colombia     

.     tio,ooo 

2.33 

2.33 

Ecuador     

2,000 

3.00 

6.87 

1.33 

5.20 

British     

500 

0.33 

1.33 

1.67 

3.33 

Dutch     

200 

1.00 

3.00 

2.00 

6.00 

French     

600 

1.00 

1.00 

6.00 

8.00 

Paraguay     

33,000 

0.38 

41.25 

41.63 

Peru     

2.71 

0.53 

3.24 

Uruguay     

1,700 

14.09 

3.91 

1.55 

19.55 

Venezuela     

4,300 

1.27 

4.42 

1.65 

7.34 

Spain     

76,000 

5.42 

8.82 

3.85 

18.09 

Sweden     

32,400 

4.59 

1.59 

6.00 

12.18 

Switzerland      

25,400 

19.60 

4.09 

7.70 

31.39 

Turkey     

5.50 

1.10 



6.60 

JCentral  Amer.   States. 

14,500 

0.30 

1.01 

2.74 

4.05 

Total     

.$3,127,600 

$6.40 

$2.52 

$3.03 

$11.95 

*  Includes  Straits   Settlements,   the  Malay  States,  and  Johore. 
t  Except  Costa  Rica  and  British  Honduras    (Gold  standard  countries), 
t  This  amount  has  been  reduced  to  a  gold  basis:   that  is  100  pesos  equal 
1  United  States  gold  dollar. 


262  Markets    and   Rural   Economics 

LESSON  XXXIX 

1.  What  touches  markets  and  prosperity  at  more 
points  than  any  other  agency? 

2.  Name  some  of  the  faults  of  our  banking  system 
sought  to  be  remedied  by  the  Federal  Reserve  act? 

3.  What  can  you  say  of  the  bank  failures  since  the 
Civil  War? 

4.  What  of  centralization  of  money  and  credits? 

5.  What  is  real  money? 

6.  What  is  redemption  money? 

7.  What  is  fiat  money? 

8.  What  is  credit  money? 

9.  What  is  uncovered  paper? 

10.  What  is  uncovered  money? 

1 1.  What  is  receivable  money? 

12.  How  many  kinds  of  money  have  we,  and  the 
amounts  of  each? 

13.  What  is  asset  currency? 

14.  What  principles  are  in  the  new  law  that  found 
no  favor  for  years  among  our  dominant  financiers? 

i  <;.   In  discussions  on  the  new  law,  what  were  some 
of  the  pivotal  points  of  difference? 

1 6.  What  is  prime  commercial  paper? 

17.  Where  does  the  farmer  come  in  on  this  new 
law? 

1 8.  What  controversy  arose  among  business  men 
concerning  commercial  paper? 

19.  Give  some  of  the  things  our  financial  system 
should   secure. 

LESSON  XL 

i.   Give  the  main  features  of  our  banking  systems 
which  our  federal  reserve  act  repealed. 


Markets    and   Rural   Economics  263 

2.  What  are  the  differences  between  the  powers 
and  privileges  of  State  banks  and  National  banks? 

3.  What  kinds  of  corporations  does  the  National 
Government  charter,  and  what  kinds  do  the  States 
charter? 

4.  Is  there  any  difference  between  being  chartered 
and  being  incorporated? 

5.  Can  anyone  run  a  private  bank  who  wants  to 
and  has  capital? 

6.  Are  private  banks  chartered? 

7.  What  is  a  trust  company? 

8.  What  does  the  national  constitution  mean  when 
it  says  that  "Congress  shall  have  power  to  coin  money 
and  to  regulate  the  value  thereof? 

9.  Give    the    names,    amounts,    and    legal    tender 
qualities  of  our  various  kinds  of  money. 

10.  Have  we  any  kind  of  money  that  is  a  full  legal 
tender  for  all  debts,  public  and  private,  receivable  for 
all  debts,  dues  and  demands  of  the  government,  at 
its  face  value  ? 

LESSON  XLI 

1.  What  is  the  name  of  the  new  financial  law? 

2.  What  are  some  of  its  ostensible  purposes? 

3.  What   is   meant   by   "Federal    reverse   bank"; 
"Federal  reserve  district";  "Reserve  city";  "Central 
reserve  city"  ? 

4.  Is  it  optional,  or  obligatory,  for  national  banks 
to  become  stockholders  in  the  federal  reserve  bank? 

5.  How  about  State  banks  becoming  members? 

6.  What  are  the  requirements  as  to  capitalization? 
Who  may  deposit? 

7.  What  are  the  powers  and  privileges  of  the  Fed- 
eral reserve  bank? 


264  Markets    and  Rural   Economics 

8.  What  has  the  Government  as  security  behind  its 
banknotes  furnished  the  Federal  reserve  banks? 

9.  How  is  a  Federal  reserve  bank  organized  and 
controlled  ? 

10.  What  are  the  functions  of  the  Federal  Reserve 
Board? 

11.  Who  besides  banks  might  be  stockholders  in  the 
Federal  reserve  banks  ? 

12.  How  are  the  earnings  divided? 

13.  How  about  branch  officers? 

14.  What  are  the  requirements  in  the  reserves  of 
the  various  banks  ? 

15.  How  about  loans  on  real  estate? 

1 6.  How  about  foreign  branches? 

17.  What  country  has  the  largest  amount  of  money 
per  capita? 

1 8.  What  country  has  the  least  amount  i 

19.  What  country  has  no  metal  money? 

20.  What    countries    have    no    uncovered    paper 
money  ? 


CHAPTER    XXVIII 

RURAL  CREDITS  IN  THE  UNITED  STATES 

So  long  as  we  have  the  gold  standard  the  only  way 
the  farmer  can  get  connection  with  gold-covered  cur- 
rency subject  to  rural  credit  call  is  to  tie  up  with  a  re- 
gional bank  by  owning  a  national  bank.  A  rural  credit 
bill  for  short  time  credit  should  provide  for  the 
Farmers'  Cooperative  bank  to  join  the  Federal  Re- 
serve Union.  The  currency,  backed  by  the  gold  re- 
serve, which  the  commercial  bank  now  has  provided, 
is  beyond  the  reach  of  the  farmer  without  this  con- 
nection. The  prices  of  commodities  of  the  world  do 
not  now  function  in  terms  of  gold  except  relatively. 
Exchange  value,  based  on  use,  tilts  the  beam  of  mar- 
kets regardless  of  metal  barter. 

The  United  States  Commission,  appointed  by  Con- 
gress to  study  rural  credits  in  Europe  in  1913  (and 
accompanied  the  American  commission  which  studied 
organized  agriculture  in  all  its  phases)  prepared  a  bill 
for  the  establishing  of  a  system  of  rural  credits  in 
the  United  States.  This  bill  was  introduced  into  both 
houses  of  Congress  and  referred  to  sub-committees  on 
Banking  and  Currency  during  the  session  of  1914. 
Extensive  hearings  were  held,  and  representative  men 
from  all  over  the  country  came  before  the  joint  com- 
mittee to  present  their  views.  Very  naturally,  the  bill 
formulated  by  the  United  States  Commission  became 
the  storm  center  of  the  discussion. 


266  Markets    and   Rural   Economics 

SOME    OF    ITS    FEATURES 

1.  It  provided  for  a  commissioner  of  farm  land 
banks  to  be  at  the  head  of  a  bureau  of  land  banks  in 
the  department  of  the  Treasury. 

2.  Also  for  the  granting  of  federal  charters  to  na- 
tional farm  land  banks. 

3.  The  State  laws  must  provide  for  simplified  land- 
title  transfers,  registration  and  conveyance  and  fore- 
closing of  mortgages; 

4.  For  amortization  in  payment  of  debt. 

7.  For  co-operative  banks. 

5.  For  a  land  bank  to  be  founded  by  ten  persons. 
4.   For  amortization  in  payment  of  debt. 

8.  With  minimum  capital  stock  of  $10,000. 

9.  Said  banks  to  receive  deposits  to  an  amount  not 
to  exceed  one-half  of  paid  up  capital  and  surplus; 
postals  savings  to  the  same  extent. 

10.  To  loan  on  farm  lands  in  the  State. 

11.  To   make   loans   upon    farm   lands   anywhere 
within   the   State   in  which  such  national   farm-land 
bank  is  operated,  provided — 

(a)  That  such  loans  are  made  for  not  more  than 
thirty-five  years; 

(b)  That  such  loans  are  secured  by  a  first  mort- 
gage or  deed  of  trust  on  farm  lands; 

(c)  That  such  loans  shall  be  made  for  any  of  the 
following  purposes : 

(i)  To  complete  the  purchase  of  the  agricultural 
lands  mortgaged; 

(ii)  To  improve  and  equip  such  lands  for  agri- 
cultural purposes; 

(iii)  To  pay  and  discharge  debts  secured  by  mort- 
gages or  deeds  of  trust  on  said  lands: 

(d)  That  such  loans  do  not  exceed  fifty  per  centum 
in  amount  in  the  case  of  improved  farm  land,  and 


Markets   and   Rural   Economics  267 

do  not  exceed  forty  per  centum  in  amount  in  other 
cases  of  the  value  of  the  said  lands,  to  be  determined 
by  an  appraisal  as  provided  in  this  act. 

(e)  That  every  such  farm-land  loan  contain  a 
mandatory  provision  for  the  amortization  of  such 
loan,  or  reduction  of  same  by  annual  or  semi-annual 
payments  on  account  of  principal:  Provided,  That 
the  loan  extends  over  a  period  exceeding  five  years. 

(f)  That  every  such  loan  may  be  paid  off  in  whole 
or  in  part  by  the  borrower,  in  acordance  with  rules 
to  be  prescribed  by  the  commissioner  of  farm-land 
banks,  at  any  interest  period,  after  such  loan  has  con- 
tinued for  five  years,  by  the  payment  of  the  whole  or  a 
part  of  such  loan,  with  interest  to  such  date,  after 
crediting  the  amortization  payments  on  the  same  as 
when  they  were  made. 

12.  To  issue,  sell,  and  trade  in  its  own  collateral 
trust  bonds,  which  shall  be  known  and  described  as 
"national  land-bank  bonds,"  secured  by  the  deposit, 
as  elsewhere  provided,  of  first  mortgages  or  first 
deeds  of  trust  (and  of  notes  or  bonds  secured 
thereby) ,  in  an  amount  equal  at  least  to  the  face  value 
of  the  national  land-bank  bonds  so  issued  and  sold 
by  the  said  bank:  Provided — 

1 i )  That  the  rate  of  interest  upon  the  farm-land 
loans  evidenced  by  the  'mortgages  or  deeds  of  trust 
held  by  the  bank  as  security  for  its  own  national  land- 
bank  bonds  shall  not  exceed  the  rate  of  interest  paid 
on  such  national  land-bank  bonds  by  more  than  one 
per  centum  annually  upon  the  amount  unpaid  on  the 
loan,    which    said    one   per    centum    shall    cover    all 
charges  of  administration. 

(2)  That  all  national  land-bank  bonds  issued  by 
the  said  bank  shall  be  payable  on  a  date  specified  and 
shall  be  subject  to  call  at  par,  at  any  interest  period, 


268  Markets    and   Rural   Economics 

after  the  date  of  issue,  or  after  a  specified  time,  by 
such  proper  notice  and  advertisement  as  may  be  pro- 
vided by  the  commissioner  of  farm-land  banks. 

(3)  That  such  national  land-bank  bonds  shall  be 
always  protected  by  the  deposit,  as  security  therefor, 
of  at  least  an  equal  amount  in  face  value  of  first  mort- 
gage or  first  deed  of  trust  farm  loans  (and  of  notes 
or  bonds  secured  thereby) ,  maturing  not  less  than  five 
years  after  their  date. 

(4)  That  as  the  amortization  payments  are  cred- 
ited upon  the  first  mortgage  or  first  deed  of  trust  farm 
loans  so  deposited  as  security,  the  national  land-bank 
bonds  issued  by  the  bank  and  secured  thereby  shall  be 
called  and  paid,  or  purchased  in  the  open  market  and 
retired,  to  the  extent  of  the  credits  made  upon  such 
first  mortgage  or  first  deed  of  trust  farm  loans  held  as 
security  for  the  same,  under  rules  and  regulations 
made  by  the  commissioner  of  farm-land  banks. 

(5)  That  the  first  mortgage  or  first  deed  of  trust 
farm  loans  (and  the  notes  and  bonds  secured  thereby) 
held  as  security   for  such  national  land-bank  bonds 
shall  at  times  be  in  the  joint  possession  and  under  the 
joint  control  of  the  said  bank  and  of  the  Federal 
fiduciary  agent  hereinafter  provided  for,  and  that  a 
register  of  such  first  mortgages  or  first  deeds  of  trust 
shall  be  at  all  times  kept  by  the  bank,  entries  or  can- 
cellations in  which  shall  only  be  made  with  the  ap- 
proval in  writing  of  such  Federal  fiduciary  agent. 

(6)  That  no  national  land-bank  bond  shall  be  is- 
sued against  any  mortgage,  deed  of  trust  (or  notes  or 
bonds  secured  thereby)  which  falls  due  earlier  than 

five  years  after  its  date. 
********** 

13.  To  use  its  capital  stock,  surplus,  and  deposits 
as  a  revolving  fund  for  the  temporary  purchase  or 


Markets    and   Rural   Economics  269 

holding  of  such  first  mortgage  or  first  deed  of  trust 
farm  loans;  or  to  use  the  same  for  the  purpose  of 
buying  in  its  national  land-bank  bonds  and 
holding  them  temporarily,  so  as  to  maintain  the  price 
of  the  same;  or  to  loan  its  capital  and  surplus  on  first 
mortgages  or  first  deeds  of  trust  for  a  period  not  ex- 
ceeding five  years,  Provided,  that  not  to  exceed  fifty 
per  centum  of  such  capital  and  surplus  may  be  perm- 
anently invested  on  such  national  land-bank  bonds 
and  in  first  mortgage  or  first  deed-of-trust  farm  loans, 
and  the  remainder  of  the  capital  and  surplus  can  be 
permanently  invested  only  in  United  States  Govern- 
ment bonds,  in  the  bonds  of  the  State  in  which  such 
bank  is  operated,  or  in  such  other  securities  as  may 
be  authorized  by  the  commissioner  of  farm-land 
banks. 

14.  To  buy  and  sell  gold  and  silver  coin  and  bul- 
lion; to  collect  notes,  drafts,  and  bills  of  exchange;  to 
discount  commercial  and  other 'short-term  paper  and 
deal  in  national  land-bank  bonds  of  other  farm-land 
banks  with  its  deposits;  to  keep  reciprocal  accounts 
with  other  banks;  to  rediscount  its  commercial  and 
other  short-term  paper  with  other  banks;  and  to  carry 
on  a  general  banking  business  so  far  as  its  current 
deposits  are  concerned.  Provided  that  such  deposits 
do  not  exceed  fifty  per  centum  of  its  capital 
and  surplus,  except  as  elsewhere  herein  specified,  Pro- 
vided, however,  That  farm-land  banks,  cooperative, 
may  for  and  with  their  stockholders  also  do  and  trans- 
act the  business  now  possessed  and  exercised  by  na- 
tional banks  under  the  laws  of  the  United  States, 
under  such  rules  and  regulations  as  may  be  prescribed 
bv  the  commissioner  of  farm-land  banks. 


270  Markets    and   Rural   Economics 

SPECIFIC  LIMITATIONS 

Every  national  farm-land  bank  shall  be  subject  to 
the  following  specific  limitations: 

(a)  The  amount  of  national  land-bank  bonds  that 
may  be  issued  and  outstanding  at  any  one  time  by  such 
national  farm-land  bank  shall  not  exceed  fifteen  times 
its  capital  and  accumulated  surplus. 

(b)  The   charges   of   administration   imposed  by 
such  national  farm-land  bank  upon  the  borrower  for 
handling  such  loan  shall  not  in  each  instance  exceed 
an  annual  charge  of  one  per  centum  upon  the  amount 
unpaid  on  loan. 

(c)  The  payments  to  be  made  annually,  or  semi- 
annually,  by  the  borrower  shall  in  all  cases  be  suffi- 
cient to  pay  the  interest  charge  upon  the  loan,  the  ad- 
ministration charges  of  the  bank,  and  an  amortization 
payment  sufficient  to  retire  and  pay  off  the  amount  of 
the  principal  borrowed  (as  evidenced  by  the  face  of 
said  first  mortgage  or  first  deed  of  trust  and  the  notes 
or  bonds  secured  thereby),  at  its  maturity. 

(d)  No  national  farm-land  bank  shall  at  any  time 
loan  any  money  upon  the  faith  or  credit,  or  upon  the 
assignment,  of  its  own  stock,  or  of  the  stock  of  any 
othei  national  farm-land  bank;  nor  shall  any  national 
i arm-land  bank  loan  to,  or  on  the  credit  of  any  one  in- 
dividual or  institution,  either  on  the  security  of  land 
or  on  any  other  security,   an   amount  in   excess  of 
twenty  per  centum  of  the  sum  of  its  then  paid-in  cap- 
ital  and   surplus. 
********** 

Eighth.  But  no  national  farm  land  bank  shall 
transact  any  business  except  such  as  is  incidentally  and 
necessary  preliminary  to  its  organization  until  it  has 


Markets    and   Rural   Economics  271 

been  authorized  to  commence  business  by  the  commis- 
sioner of  farm-land  banks. 


HOLDINGS    OF    REAL    ESTATE  ;"- 

Sec.  17.  That  a  national  farm-land  bank  may  pur- 
chase, hold,  and  convey  real  estate  for  the  following 
purposes  and  for  no  other: 

First.  Such  as  shall  be  necssary  for  its  immediate 
accommodation  in  the  transaction  of  its  business. 

Second.  Such  as  shall  be  mortgaged  to  it  by  way 
of  security  for  loans  made  by  it,  as  elsewhere  herein 
provided. 

Third.  Such  as  shall  be  conveyed  to  it  in  satisfac- 
tion of  debts  contracted  in  the  course  of  business  deal- 
ings. 

Fourth.  Such  as  it  shall  purchase  at  sale  under 
judgments,  decrees,  or  mortgages  or  deeds  of  trust, 
held  by  the  bank,  or  shall  purchase  to  secure  debts  due 
to  it. 

But  no  such  bank  shall  hold  the  title  and  possession 
of  any  real  estate  conveyed  to  or  purchased  by  it  to 
secure  any  debts  due  to  it  for  a  longer  period  than  five 
years. 

EXEMPTION   FROM  TAXATION 

Sec.  1 8.  That  every  national  farm-land  bank  in- 
corporated under  the  terms  of  this  act  and  the  cap- 
ital stock  and  surplus  therein  and  income  derived^ 
therefrom  and  the  mortgages  and  deeds  of  trust 
(and  the  notes  and  bonds  secured  thereby)  held  by 
said  bank  and  the  national  land-bank  bonds  issued 
by  the  same  shall  be  exempt  from  Federal,  State, 


272  Markets  and  Rural  Economics 

and  local  taxation,  except  in  resepect  to  taxes  upon 

real  estate. 

*         *         *         *         #         *         *         *         *         * 


LIABILITY  OF   STOCKHOLDERS 

Sec.  31.  That  the  shareholders  of  every  national 
farm-land  bank,  shall  be  held  individually  respon- 
sible, equally  and  ratably  and  not  one  for  another, 
for  all  contracts,  debts,  and  engagements  of  such 
banks,  to  the  extent  of  the  amount  of  their  stock 
therein,  at  the  par  value  thereof,  in  addition  to  the 
amount  invested  in  such  shares,  unless,  in  the  case 
of  national  farm-land  banks  cooperative,  by  a  two- 
thirds  vote  of  the  stockholders  a  larger  liability  shall 
be  undertaken. 


PRIVILEGES  GRANTED  TO  NATIONAL  FARM-LAND 
BANKS 

Sec.  34.  That  the  national  land-bank  bonds  of 
any  national  farm-land  bank  shall  be  available  for 
the  following  purposes : 

First.  As  security  for  the  deposit  of  postal  sav- 
ings funds  in  such  national  farm-land  banks  and  all 
other  banks  authorized  to  receive  such  deposits. 

Second.  As  a  legal  investment  for  time  deposits 
of  national  banking  associations,  as  provided  in  the 
Federal  reserve  act  and  for  the  funds  accumulated 
in  savings  banks. 

Third.  As  a  legal  investment  for  trust  funds 
and  estates  upon  the  charge  of  or  administered  by 
any  of  the  courts  of  the  United  States. 

Fourth.     As  a   security   for  loans   from  national 


Markets   and   Rural   Economics  273 

banking  associations  to  national  farm-land  banks  or 
to  individuals,  for  not  exceeding  five  years,  to  an 
amount  aggregating  not  over  twenty-five  per  centum 
of  the  capital  and  surplus  or  to  one-third  of  the  time 
deposits  of  the  national  banking  association  making 
such  loan.  Such  loans  to  be  made  and  held  by  the 
national  banking  association  making  the  same  as  be- 
ing within  the  provisions  of  section  24  of  the  Fed- 
eral reserve  act,  so  as  to  permit  national  banking  as- 
sociations to  lend  to  national  farm-land  banks,  on 
their  obligations  secured  by  their  national  land-bank 
bonds,  in  place  of  making  the  loan  directly  on  farm 
lands,  as  provided  for  in  said  section. 

CRITICISM 

1 i )  The  provision  for  little  local  banks  with  no 
connection  with  each  other  or  with  any  other  banks, 
and  with  no   aid  from  the  United  States  or  State 
governments,    to   be    organized   and   empowered   to 
appraise  the  land  of  its  members,   hold  mortgages 
thereon  and  issue  bonds   and  market  them   as  best 
they  could  was  certainly  a  weak  feature  of  the  law. 

(2)  There  was  indefinite  provision  for  the  liquida- 
tion of  these  local  banks.     As  the  loans  could  run  for 
35  years,  how  could  they  liquidate  when  there  was  no 
provision   for  the   distribution  of  the   loans   among 
other  units  or  the  taking  of  them  over  by  a  State  unit 
acting  as  a  regional  head? 

(3)  They   were    disconnected   so    as   to    compete 
with  each  other,  which  might  easily  take  the  form  of 
over-appraisement  but  were  handicapped  in  compe- 
tition with  other  banks  in  being  limited  in  the  amount 
of  deposit  they  could  receive  and  in  the  kind  of  loans 
could  make. 


274  Markets    and   Rural   Economics 

(4)  On  the  point  of  creating  confidence   in  the 
buyers  of  the  bonds,  the  advantage  of  the  State  sys- 
tem is  apparent.     With  the  local  unit  standing  along 
through  a  serious  stress,  say  from  drought,  flood  or 
insect  ravages,  the  props  fall  from  under;  whereas 
with  the  state  unit  the  combined  strength  of  all  the 
local  units  can  tide  the  local  over  the  stress  and  keep 
its  bond  obligation  at  par. 

(5)  Bonds  should  be  marketed  only  by  the  State 
organization,  for  the  reason  that  if  the  locals  could 
market  independently,  as  the  bill  provided,  and  the 
investing  public  got  the  idea  that  the  State  unit  was 
marketing  only  those  bonds  which  the  locals  could 
not  place,  it  would  throw  suspicion  on  the  issue. 

(6)  Local   appraisement  in  this  case  has  a  pre- 
mium on  exaggeration  which  a   state   appraisement 
would  not  show. 

(7)  The  marketing  of  the  securities  is  left  in  the 
bill  to   the   local  bank.      Even   States   have   trouble 
marketing  bonds.     What  could  the  average  fiduciary 
agent  in  a  little  local  bank  as  is  provided  for  in  the 
bill  do  in  the  broad  world  market  trying  to  sell  bonds 
of  an  unknown  value,  backed  by  a  concern  that  could 
never  be  widely  known   and  by  men  without  legal 
knowledge  or  business  experience? 

(8)  The  bill  did  not  provide   for  standardizing 
the  issue  of  these  banks;  the  method  of  establishing 
sinking  funds  or  the  rates  of  interest. 

(9)  No  kind  of  rural  credit  can  answer  the  pur- 
pose that  is  not  founded  on  the  co-operative  prin- 
ciple.   We  do  not  need  other  schemes  for  joint  stock, 
profit  seeking,  commercial  banks. 

(10)  In  the  event  of  selling  mortgaged  property, 
the  bank  should  have  the  option  of  passing  on  the 


Markets   and   Rural   Economics  275 

purchaser,   or   requiring  the  payment  of  the  mort- 
gage. 

( 1 1 )  The    federal    reserve   banks   should   be   al- 
lowed to  buy  and  sell  these  debenture  bonds  without 
guaranteeing  them. 

(12)  As  to  relative  expense  of  operating  the  sys- 
tem under  state  divisions  or  the  independent  local 
system,  it  is  clear  that  the  locals  would  have  to  con- 
tribute in  proportion  to  the  volume  of  business  fur- 
nished by  each  to  the  support  of  the  central  organ- 
ization, but  the  State  system  would  obviate  the  ne- 
cessity  for  the   local  fiduciary   agent   and   evidently 
the  marketing  of  bonds  could  be  carried  on  much 
cheaper  by  one  office  for  the  State  than  by  each  bank 
independently,  and  inspection  charges  be  reduced. 

It  will  be  noted  that  this  bill  asks  for  government 
loans.  It  provides  for  the  using  of  government  sav- 
ings deposits  and  other  government-controlled  money. 
It  is  hardly  consistent  to  oppose  government  loans  to 
farmers  and  advocate  government  loans  to  farm-land 
banks  at  2^  per  cent.,  and  allow  the  bank  to  loan 
it  to  the  farmer  at  "the  prevailing  rate."  These  farm- 
land banks  under  its  provisions  can  be  started  by  any- 
body and  they  would  be  dominated  by  the  lender  and 
not  by  the  borrower.  The  Supreme  Court  of  the 
United  States  has  declared  that,  when  a  bank  receives 
money  on  deposit,  it  assumes  all  the  responsibility  of  a 
debtor:  so  that  the  deposit  by  the  government  is 
equivalent  to  a  loan.  A  strictly  land-bank  business 
requires  unrecallable  loans;  so  that  if  these  land  banks 
were  permitted  to  receive  unlimited  deposits  they 
would  need  to  be  allowed  to  make  recallable  loans. 

It  is  not  probable  that  money  would  come  to  the 
borrower  at  as  low  interest  under  a  farm-land  bank 
as  from  direct  government  loans,  but  the  development 


276  Markets    and  Rural   Economics 

of  initiative  through  the  cooperation  and  business 
manipulation  necessary  to  secure  cooperative  credit 
is  worth  considering.  And  the  charge  of  government 
favoritism  in  making  direct  loans  only  to  a  special 
class  would  be  obviated. 

The  bank  must  either  be  so  small  that  the  over- 
head charges  are  practically  nil  or  it  must  be  large 
enough  for  its  profits  to  cover  considerable  overhead 
charges.  Evidently  one  so  small  as  to  escape  ex- 
penses would  be  handicapped  in  marketing  its  bonds. 

Whatever  is  done  with  regard  to  long  time  loans 
on  land  there  needs  also  to  be  a  personal  credit  short 
time  system,  with  savings  and  open  account  features. 
The  money  the  farmer  deposits  in  a  commercial  bank 
is  loaned  to  commercial  business  and  not  to  agricul- 
ture. What  is  needed  is  a  system  of  revolving  agri- 
cultural cash  and  credit  that  stays  with  agriculture. 

It  has  been  suggested  that  a  rural  credit  system 
should  be  established  on  a  modified  building  and 
loan  association  plan.  There  are  but  few  parts  of  the 
country  that  would  use  the  building  and  loan  idea.  It 
gets  its  capital  from  the  members  by  a  system  of  dues. 
If  he  pays  in  a  while  and  allows  his  payments  to  lapse 
he  loses  what  he  has  paid.  It  is  the  old  insurance 
idea.  Payments  required  of  a  farmer  oftener  than 
once  a  year  are  not  suited  for  farm  credit.  The 
country  is  already  over-organized  by  fraternities  re- 
quiring the  payment  of  heavy  dues. 

It  is  also  true  that  the  mortgage  basis  for  farm  loans 
would  be  handicapped  in  some  states  by  laws  that  the 
people  will  not  repeal.  Ever  since  the  days  of  the 
Republic  the  State  of  Texas  has  had  an  organic  pro- 
vision prohibiting  the  mortgaging  of  a  homestead — 
even  though  the  husband  and  wife  sign  it.  A 


Markets   and  Rural   Economics  277 

vendor's  lien  is  the  nearest  approach  to  a  mortgage 
that  can  be  had  on  a  homestead. 

If  government  aid  is  given  it  could  take  the  form 
of  an  endowment  loan,  to  be  repaid  by  amortization. 

The  legitimate  function  of  money  is  to  facilitate 
transfer  of  title.  The  legitimate  end  of  finance  is 
to  facilitate  production  and  distribution.  When  pros- 
tituted to  other  purposes  it  becomes  a  tyrant.  This 
country  has  shown  the  greatest  industrial  and  com- 
mercial development  ever  seen  in  the  history  of  the 
world.  Finance  and  commerce  have  joined  hands  and 
worked  together  with  a  consummate  skill.  Agricul- 
ture has  stood  aloof  and  paid  the  penalty  of  its  isola- 
tion. 

We  have  also  developed  a  system  of  financial 
banking  which  is  superceding  commercial  banking. 
The  manufacture  and  sale  of  securities  has  grown 
to  be  an  "industry"  in  the  line  of  trust  promotions. 

Plants  are  merged  into  an  over-capitalized  concern 
which  is  made  to  absorb  the  mass  of  securities  by 
holding  out  prospects  of  large  profits.  When  the 
investing  public  has  purchased  these  securities  they 
are  then  anxious  for  the  trust  to  make  good  the  prom- 
ise of  profits,  and  by  this  means  a  constantly  in- 
creasing number  of  citizens  become  accomplices  in 
monopoly  and  foes  of  trust  legislation,  and  work 
against  the  common  weal,  to  make  good  the  over- 
capitalized stock.  The  earnings  of  the  company  are 
capitalized  until  a  trust,  originally  half  water,  may 
get  to  be  worth  dollar  for  dollar  at  physical  valua- 
tion for  the  entire  stock  issued.  With  the  good  money 
thus  obtained  by  these  promoters  the  security  sellers 
get  a  fresh  grip  on  the  country's  solid  resources.  It 
must  be  borne  in  mind  that  it  is  only  when  a  business 
has  control  of  the  market  that  over-capitalization 


278  Markets    and   Rural   Economics 

makes  for  higher  prices,  for  without  monopoly  com- 
petition would  cut  out  the  profits  on  fictitious  stocks. 

The  largest  banks,  trust  companies  and  insurance 
companies  have  massed  capital  under  one  manage- 
ment to  be  employed,  not  as  the  servant  of  commerce 
and  to  facilitate  exchange,  but  to  subordinate  com- 
mercial demands  and  to  finance  corporate  securities 
controlled  by  the  interlocking  directorates. 

Through  all  the  plans  proposed  by  the  bills  that 
had  been  introduced  and  widely  discussed  prior  to 
1913,  and  all  the  recommendations  of  the  Monetary 
Commission,  and  all  the  plans  advocated  by  the  Na- 
tional Citizens'  League  for  the  Promotion  of  Sound 
Banking,  we  looked  in  vain  for  anything  covering  the 
needs  of  the  farmer  on  the  following  points : 

1 i )  Time  exchange  extending  for  a  year,  so  as  to 
help  him  perform  the  carrying  function  in  the  mar- 
keting of  his  crops. 

( 2 )  Long-time  loans  suitable  for  poor  men  to  buy 
land  and  pay  for  it  by  amortization,  thereby  checking 
tenancy  and  promoting  home  ownership. 

(3)  Providing  for  the  loaning  of  postal  savings  de- 
posits in  the  vicinity  of  the  deposits  for  agricultural 
purposes. 

(4)  Providing  debentures  for  investment  that  will 
encourage    home    ownership    versus    absentee    land- 
lordism. 

Cooperative  banking  should  recognize  each  factor 
necessary  for  its  successful  operation. 

These  factors  are:  (i)  Stockholder,  (2)  deposi- 
tor, (3)  borrower,  and  if  subsidized  by  the  Govern- 
ment, (4)  the  State  or  National  Government  fur- 
nishing part  of  the  funds.  The  banks  of  the  United 
States  have  been  run  for  stockholders  and  not  for 
the  service  of  the  people.  Commercial  banking  is  a 


Markets   and  Rural   Economics  279 

profession  and  not  a  mere  means  to  an  end,  and  that 
end  the  service  of  business,  as  it  should  be. 

Each  depositor  in  the  land  reserve  bank — whether 
individual  or  bank,  or  other  corporation — over  a  pre- 
scribed amount — should  have  one  vote;  the  borrow- 
ers from  each  local  bank  through  which  loans  are- 
secured  have  one  vote;  each  stockholder  one  vote, 
and  if  the  Government  has  an  interest  it  should  have 
a  vote  for  each  interest  in  proportion  to  all  the  other 
interests  concerned.  The  mortgages  upon  the  prop- 
erty of  the  borrower  are  pooled  into  one  individual 
security  for  all  the  bonds  the  land-bank  issues,  and 
it  will  be  to  their  interest  to  have  it  operated  on  the 
soundest  basis  and  in  the  safest  manner. 

Experience  has  shown  that  the  only  practical  meth- 
od for  a  farmer  to  pay  a  loan  secured  by  his  land  is 
by  amortization.  The  annual  sum  paid  by  the  bor- 
rower to  be  composed  of  the  interest,  the  prorate  of 
the  cost  of  the  business,  and  an  installment  on  the 
principal.  By  this  process  the  amount  of  interest  de- 
creases and  the  amortization  item  increases  till  the 
debt  is  extinguished,  the  percentage  of  the  capital 
to  be  paid  each  year  depending  on  the  term  of  the 
loan. 

The  land  bank  markets  land  bonds  secured  by  its 
mortgages  at  whatever  they  will  bring  in  the  open 
market  in  the  form  of  debentures  suitable  for  small 
purchasers  as  well  as  large  ones. 

The  annual  payments  upon  the  principal  earn  in- 
terest in  the  land  bank  or  save  interest  when  used 
to  buy  in  and  retire  bonds,  so  the  borrower  gets  the 
benefit.  The  borrower  should  also  participate  in  all 
the  earnings  of  the  land  bank  in  profits  above  sur- 
plus. The  larger  the  amortization  and  the  lower 


280  Markets    and   Rural   Economics 

the  rate  of  interest  the  sooner  will  the  annuity  liqui- 
land-bank  at  par.  This  would  have  a  tendency  to 
date  the  debt. 

It  could  be  provided  that  borrowers  may  pay  their 
land  debts  either  in  money  or  the  debentures  of  the 
maintain  the  price  of  the  bonds  at  face  value.  They 
could  be  registered  or  coupon  bonds,  as  the  investor 
preferred,  as  is  now  the  case  with  postal  savings 
bonds.  Each  bank  should  act  as  an  agency  for  buy- 
ing and  selling  these  bonds.  Each  bond  is  secured 
by  all  the  assets  of  the  land  bank — reserve,  surplus 
and  mortgages  held.  No  bond  is  to  be  issued  against 
any  specific  mortgage,  but  all  are  pooled  as  security 
for  all  outstanding  bonds. 

One  of  the  curses  of  American  agriculture  is  ab- 
sentee, landlordism  and  tenancy.  Farmers  who  ac- 
cumulate a  competency,  and,  for  one  reason  or  an- 
other, move  to  the  towns  or  cities  and  rent  their 
farms  can  not  keep  their  farms  as  productive  as  they 
left  them,  in  as  good  repair,  and  get  a  net  increase 
from  the  investment.  It  takes  all  of  the  rent  to  keep 
the  farm  and  its  improvements  in  proper  repair.  This 
leads  to  deterioration  of  most  farms  cultivated  by 
others  than  the  owners.  If  there  were  safe  invest- 
ments, paying  a  reasonable  per  cent.,  that  was  safe 
and  unquestionable,  requiring  no  attention  or  worry, 
these  absentee  landlords  would  sell  their  farms  to  the 
homeless  and  invest  the  money  in  the  land-bank  bonds. 
But  they  would  prefer  having  cash  for  the  farms  and 
not  wait  for  slow  payment  from  the  purchaser.  This 
implies  the  need  of  a  plan  whereby  the  purchaser  by 
paying,  say,  one-fourth  of  the  purchase  price,  can 
have  the  land-bank  pay  the  other  three-fourths  of  its 
debentures  and  allow  the  purchaser  the  regular  terms 


Markets   and   Rural    Economics  281 

to  liquidate  the  debt  by  amortizat'on  direct  to  the 
bank. 

Why  not  have  mortgage  credit  banks  dealing  direct 
with  farmers  individually? 

Because  it  would  be  a  case  of  bargain-driving  be- 
tween individual  farmers  and  individual  banks.  The 
movement  in  the  early  eighties  for  mortgage  banks 
set  on  foot  by  bankers  ended  disastrously.  On  this 
point  Ambassador  Myron  T.  Herrick  said,  on  the 
1 1  th  of  September,  1912: 

"I  think  it  would  be  most  unfortunate  if,  after  the 
public  has  awakened  to  an  interest  in  this  matter,  ill- 
considered  organizations  should  succeed  in  getting  into 
the  field  and  bringing  about  a  repetition  of  the  farm 
mortgage  financial  disasters  of  some  twenty-five  years 
ago.  Therefore,  I  am  most  willing  that  authoratitive 
warning  be  made  on  this  point." 

Why  not  use  land  bonds  as  a  basis  for  an  issue 
of  money? 

Bond-secured  currency  has  never  been  a  success. 
Credit  currency  needs  quick  convertibility.  Every 
effort  to  base  credit  currency  on  land  or  to  overissue 
mortgage  securities  or  to  put  mortgages  in  advance 
of  the  development  of  a  region  has  resulted  in  a  dis- 
astrous failure.  We  have  examples  in  the  John  Law 
French  assignats,  based  on  untold  natural  wealth  of 
French  possessions;  in  the  Cedula  or  Argentine  land 
debentures,  and  kindred  experiences. 

Let's  get  a  few  fundamentals: 

Question :    What  are  the  purposes  of  rural  credits  ? 

Answer:  (i)  To  bring  into  existence  a  banking 
and  currency  system  that  is  as  well  adapted  to  agri- 
culture as  our  present  banking  and  currency  is  to  a 
commercial  business:  (a)  by  extension  of  time  on 
land  payments  so  as  to  allow  liquidations  by  small 


282  Markets    and   Rural   Economics 

installments;  (b)  by  making  available  in  open  account 
funds  for  agricultural  operations  below  the  average 
profits  in  farming;  (c)  by  enabling  farmers  to  finance 
cooperative  marketing. 

(2)  For  the  financial  and  social  betterment  of 
country  life,  that  over-urbanization  may  be  checked 
and  tenancy  changed  to  home-ownership. 

Question:     How  many  kinds  of  rural  credit? 

Answer:  Two  kinds  with  subdivisions  of  each: 
(i)  Long-time  land  loans:  (a)  for  purpose  of  pur- 
chase; (b)  for  purpose  of  production  or  improve- 
ment. 

(2)  Short-term  loans  on  personal  security;  (a)  for 
productive  purposes;  (b)  for  other  purposes. 

Question  :  What  are  the  possible  sources  of  money 
supply  ? 

Answer:  Three:  (a)  by  subvention ;  (b)  by  bonds 
or  debentures;  (c)  by  deposits  and  shares. 

Question:  What  are  the  functions  of  rural  cred- 
its? 

Answer:  (i)  To  aid  in  mobilizing  security;  (2) 
to  furnish  an  adequate  means  of  rediscounting  agri- 
cultural paper  at  cost.  > 

All  long-time  credits  are  based  on  land,  which  in- 
volves the  mortgaging  of  the  land  that  bonds  may 
be  issued  on  the  collective  guarantee  of  the  mort- 
gages held  in  pool. 

Is  bonding  dangerous?  Quite  a  number  of  people 
are  shocked  at  the  thought  of  making  it  easy  for  one 
to  go  in  debt  on  easy  terms,  and  that,  too,  by  abolish- 
ing exemptions.  Moralize  against  debt  all  we  will, 
it  is  quite  evident  that  those  who  have  succeeded  in 
floating  the  heaviest  debts  have  gathered  the  harvest. 
It  all  depends  upon  the  relation  of  the  cost  of  the 
debt  to  the  profits  of  the  business. 


Markets   and  Rural   Economics  283 

The  farmers  owe  about  $3,000,000,000,  of  which 
$2,000,000,000  is  backed  up  by  farm  mortgages  al- 
ready. The  public  debt  of  all  the  nations  of  the  earth 
is  estimated  by  the  Bureau  of  Universal  Statistics 
at  $42,960,000,000.  The  public,  corporate  and  pri- 
vate debts  of  the  United  States  are  estimated  at 
$80,000,000,000. 

From  returns  made  directly  to  the  Wall  Street' 
Journal  by  the  various  treasurers  it  is  shown  that  the 
governmental  expenditures  in  all  the  States  has  risen 
from  $189,000,000  in  1901  to  $423,000,000,000  in 
1911.  At  a  similar  rate  of  increase  the  country  and 
municipal  taxes  rose  from  $912,000,000  in  1901  to 
$2,082,000,000  in  1911,  making  a  total  for  State  and 
local  purposes  of  $2,505,000,000.  Add  to  this  the 
expense  of  the  federal  government  of  $650,000,000 
and  we  have  for  yearly  governmental  expenditures 
alone  the  stupendous  sum  of  $3,155,000,000.  Most 
all  of  our  big  corporations  and  trusts  are  heavily 
bonded,  or  mortgaged,  or  both.  The  most  prosperous 
farm  district  of  the  United  States  is  heavily  mort- 
gaged. The  most  important  agricultural  section  of 
the  United  States  is  the  Upper  Mississippi  Valley. 
In  the  States  that  would  be  touched  by  a  circle  of 
^oo  miles'  radius,  with  center  at  Chicago,  is  found  23 
billion  out  of  the  40  billion  dollars  of  all  farm  prop- 
erty in  1910  and  ^3  per  cent,  of  all  the  improved 
farm  land  in  the  United  States.  These  States  raise 
considerably  over  half  of  the  live  stock  in  the  United 
States  and  $1,800,000,000  out  of  the  $2,700,000,000 
worth  of  cereals.  To  express  this  in  percentages  this 
area  contains  57.7  per  cent,  of  the  value  of  all  farm 
property,  60.7  per  cent,  of  the  value  of  all  farm 
lands,  51.3  per  cent,  of  all  the  cereals  as  measured 
by  value.  If  we  exclude  cotton,  as  confined  to  the 


284  Markets    and   Rural   Economics 

Southern  territory  by  climatic  conditions,  the  over- 
whelming predominance  of  this  section  would  be  even 
more  evident.  Nor  is  this  domination  declining  with 
the  development  of  other  sections  of  the  country. 
On  the  contrary,  it  gathered  to  itself  60  per  cent, 
of  the  value  added  to  farm  property  during  the  last 
decade. 

Eighteen  of  the  leading  insurance  companies  of 
the  United  States  have  loaned  on  farm  mortgages 
in  the  various  States  the  sum  of  $414,000,000.  Of 
this  sum  the  State  of  Iowa  has  absorbed  more  than 
one-fourth  or  25.5  per  cent;  Kansas  is  using  8.8 
per  cent.;  Nebraska,  9.8  per  cent.;  Missouri  8.6  per 
cent.;  Minnesota,  Indiana  and  Illinois,  7.1  per  cent, 
each.  The  farmers  in  these  states  have  been  able  to 
make  more  than  the  interest  charge  on  their  debts. 
If  a  rural  credit  system  is  established  perhaps  more 
of  these  mortgages  will  be  shifted  to  the  land  bank. 
Then,  the  insurance  companies  would  invest  in  the 
bonds  instead  of  holding  the  mortgages  direct.  Peo- 
ple who  own  farms  but  have  moved  to  town,  for  one 
reason  or  another,  and  live  on  the  rent  from  the  land, 
would  be  inclined  to  sell  the  land  and  invest  in  land 
bonds  rather  than  see  the  land  depreciate  in  value 
because  of  neglect  by  renters. 

Credit  is  a  good  thing  for  those  who  know  how 
to  use  it — so  is  a  buzz-saw.  It  is  an  instrument  of 
destruction  when  improperly  used.  It  may  be  a  means 
of  securing  ownership  or  it  may  be  the  means  of  losing 
ownership.  To  make  a  system  of  rural  credits  worth 
while  and  avoid  disastrous  results  two  things  must 
be  well  guarded :  ( i )  The  borrower  must  be  protected 
from  the  aggressions  of  the  lender  in  terms  and  rates. 
(2)  The  lender  must  be  protected  from  improvident 


Markets   and   Rural   Economics  285 

borrowers.  Experience  has  taught  that  the  best  way 
to  safeguard  loans  is  to  restrict  them  to  realty  invest- 
ments and  productive  purposes.  Experience  has  also 
taught  that  the  best  way  to  insure  the  borrower 
against  extortion  is  to  have  him  own  and  control  his 
own  lending  institution,  as  is  done  in  the  cooperative 
banks  of  Europe.  There  is  only  one  other  way,  and 
that  is,  for  the  Government  to  take  charge  of  the 
loaning  and  make  a  flat  rate  as  low  as  it  can  float 
its  own  bonds,  plus  a  fraction  of  a  per  cent,  to  cover 
cost  of  administration.  Where  this  has  been  under- 
taken by  Governments  it  has  been  to  help  agriculture 
by  indulging  farmers  in  the  purchase  of  land  or  for 
farm  development.  This  method  appeals  very  much 
to  farmers,  as  it  allows  each  to  deal  individually  with 
the  source  of  the  loan  and  avoids  the  necessity  for 
mutual  groups  acting  together  to  secure  the  loan.  It 
unifies  the  interest  rate  more  effectively  than  can  be 
done  by  any  other  means.  But  for  the  Government 
to  step  down  and  do  this  for  one  class  and  for  no 
other  class  will  very  naturally  cause  to  be  raised  a 
strenuous  protest  on  the  part  of  those  of  other  classes 
and  vocations.  Especially  is  this  true  in  a  republic 
where  paternalism  for  a  class  is  contrary  to  the  spirit 
of  republican  institutions.  In  the  language  of  the 
National  Secretary  of  the  Farmers'  Union,  Mr.  A.  C. 
Davis,  I  will  say: 

"It  is  not  so  much  the  getting  of  cheap  money  that 
will  count,  as  it  is  the  use  to  which  it  is  put.  The 
greatest  benefit  that  has  come  to  the  European  farmer 
is  not  cheap  money,  but  the  cooperative  method 
through  which  he  has  secured  cheap  money. 

"The  mere  fact  that  an  individual  can  walk  up  to  a 
government  official  and  secure  a  loan  for  a  long  time 
at  a  low  rate  of  interest  will  count  for  very  little  in 


286  Markets    and   Rural   Economics 

solving  the  rural  problem  unless  he  and  others  like 
him  combine  the  sums  thus  obtained  to  finance  the 
production  and  sale  of  the  farm  crops.  So  long  as 
we  allow  private  greed  to  monopolize  our  business,  we 
can  expect  to  be  manipulated  as  easily  with  money 
at  4  per  cent,  as  at  any  higher  rate  which  we  may 
now  be  paying.  Monied  interests  will  adjust  them- 
selves accordingly,  and  there  you  are.  Labor  people 
need  expect  no  benefit  from  a  rural  credit  system  un- 
less farmers  use  the  money  to  eliminate  unnecssary 
middlemen  and  sell  more  directly  to  consumers.  Cheap 
money  will  not  be  a  guarantee  of  prices  to  farmers, 
and  that  is  the  thing  that  makes  for  loss  or  for  profit. 
Prices  can  be  so  manipulated  that  though  you  could 
borrow  without  paying  any  interest  it  would  avail 
nothing." 

But  I  am  solicitous  for  those  whom  this  scheme 
would  not  reach.  Is  there  no  record  in  the  annals 
of  history  where  Government  went  to  the  relief  of  the 
lowly?  Can  the  Government  afford  to  set  the  example 
by  doing  such  a  thing  ? 

I  consider  Mr.  H.  W.  Wolf  the  greatest  living 
authority  on  rural  credits,,  and  in  his  address  before 
the  American  and  United  States  commissions  at  Dub- 
lin, in  speaking  of  personal  credit  banks,  he  said: 

UI  do  not  think  the  Government  should  interfere 
in  their  work,  and  to  show  what  State  interference  will 
do  I  want  to  tell  you  what  happened  to  a  Prussian 
Raiffeisen  bank  through  State  interference.  In  1895 
a  State-endowed  bank  was  formed  in  Prussia  to 
finance  a  cooperative  credit  society.  Up  to  that  time 
the  Raiffeisen  unions  had  been  solvent.  In  1895, 
when  this  bank  was  formed,  they  said,  uNo;  we  don't 
want  any  assistance;  we  have  money  enough,  and 
we  ask  you  for  nothing."  However,  the  financial  peo- 


Markets   and   Rural   Economics  287 

pie  brought  pressure  to  bear,  and  eventually  they  en- 
tered negotiations,  and  consequently  they  rather  over- 
rated the  amount  of  money  at  their  command,  and  a 
few  years  later  found  themselves  in  a  very  serious 
difficulty.  They  had  speculated  and  had  some  pretty 
hard  times.  They  got  out  of  it  only  by  rather  heroic 
methods,  and  I  do  not  think  there  will  be  any  losses 
in  the  end,  for  the  contributions  of  the  other  societies 
will  be  repaid.  Now  that  these  Raiffeisen  institu- 
tions are  free  from  State  aid  they  are  doing  well 
again. 

uGo  about  it  privately  and  you  will  find  that  even 
the  Imperial  Federation,  in  Prussia,  which  relies  on 
State  advance,  is  heavily  impoverished  with  the  in- 
terference it  has  to  submit  to.  For  what  the  State 
gives  it  asks  about  ten  times  the  amount  in  return. " 
The  head  of  this  union  complained  to  me,  in  1898, 
uWe  can  not  stand  it  any  longer."  There  followed 
rebellion;  and  when  the  State  wanted  to  tighten  the 
strings  the  unions  grew  very  restless  and  said,  uWe 
will  make  ourselves  independent.  We  have  150,000 
pounds,  and  will  throw  off  this  Government  yoke." 
The  only  banking  aid  they  had  open  to  them  was  the 
State  banks,  so  they  went  to  the  Raiffeisen  Union  to 
try  and  make  its  society  the  collective  agencies  for 
its  own  work,  and  in  return  to  act  as  agent  for  them 
and  cash  their  bills;  but  the  Raiffeisen  societies  would 
not  consent  to  this.  Then  they  went  to  an  ordinary 
joint-stock  bank,  one  of  the  largest  in  Germany.  This 
institution  does  not  tie  them  to  exclusive  business; 
and  to  both  parties  this  is  a  far  more  satisfactory 
arrangement.  Even  the  tradesmen  societies,  which 
have  been  favored  in  every  respect,  openly  say  they 
would  like  to  break  with  the  State. 

"In  France  you  have  seen  the  system  of  the  Credit 


288  Markets    and   Rural   Economics 

Agricole;  there  is  unrest,  and  the  result  of  the  State 
aid  has  not  been  what  they  had  expected.  I  under- 
stand that  you  have  visited  some  of  the  French  banks, 
where  they  really  have  accumulated  a  reserve  fund. 
That  is  what  State  aid  is  intended  for;  but  only  in 
one  or  two  districts  has  it  actually  been  done.  A 
select  committee  of  the  French  Chamber  of  Deputies, 
reporting  recently  on  credit  to  be  given  to  the  trading 
classes,  points  out  that  in  agricultural  banks  supported 
by  the  State  in  France  the  people  did  not  repay  as 
they  should.  The  money  being  advanced  by  the  State 
according  to  this  report,  some  of  the  people  did  not 
expect  to  have  to  pay  it  back." 

It  takes  $1,750,000,000  annually  to  move  three  of 
our  staple  crops,  viz.,  cotton,  $1,000,000,000;  wheat, 
$650,000,000;  tobacco,  $100,000,000.  (Corn  is  not 
moved  bodily  by  money  as  the  articles  here  named.) 

The  value  of  the  crops  marketed  by  the  farmers  is 
something  over  $6,000,000,000,  or  about  twice  the 
amount  of  the  entire  money  of  the  country.  So  if  it 
were  paid  in  cash  the  farmers  would  pocket  every 
dollar  of  money  in  the  country  once  and  the  most  of 
it  again  every  year.  If  farming  is  to  hold  its  own 
with  other  vocations  in  the  modern  struggle  of  busi- 
ness the  first  fundamental  idea  for  farmers  to  get 
into  their  minds  is  that  they,  through  their  own  co- 
operative organizations,  must  control  the  entire  busi- 
ness connected  with  agriculture.  Agriculture  should 
finance  itself  and  do  its  own  distributing.  Rural  cred- 
its is  a  means  to  an  end.  There  are  countries  without 
rural  credits  that  have  prospered  by  cooperative  agri- 
culture but  their  commercial  banking  and  currency  fa- 
cilities were  adjusted  to  agriculture  and  commerce 
alike.  This  has  not  been  done  with  us  and  is  not 
likely  to  be  done  from  the  nature  and  conditions  of 
American  banking. 


Markets   and  Rural   Economics  289 

But  Mr.  Wolf  is  not  opposed  to  Governments 
doing  as  Denmark  is  doing.  On  page  551  of  the 
report  of  the  American  Commission  in  a  statement  of 
Denmark's  method: 

uBy  Mr.  Waage.  I  shall  give  you  a  report  of  the 
small  farmers'  Credit  in  this  country  under  the  con- 
trol of  the  Government  and  aided  by  the  Govern- 
ment loans.  In  1899  the  Government  called  this 
system  into  existence — first,  for  a  period  of  five  years 
and  later  renewed  for  five  or  ten  years.  The  State 
has  put  at  the  disposal  of  the  people  who  want  to 
start  small  farms  some  millions  of  crowns ;  it  started 
with  2,000,000,  and  now  it  has  been  increased  to 
4,000,000  per  year  at  3  per  cent.  The  loans  the  Gov- 
ernment has  granted  in  this  way  amount  to  25,000,- 
ooo  crowns." 

The  Government  puts  up  nine  dollars  to  one  of 
the  farmer. 

Neither  does  Mr.  Wolf  oppose  the  policy  of  Eng- 
land in  her  dealings  with  the  Irish  peasants,  in  helping 
them  become  home  owners.  On  page  865  of  the 
Report  of  the  American  and  United  States  Commis- 
sion we  find  the  following : 

uSome  of  the  facts  elicited  are  as  follows:  The 
estates  commission  of  three  members,  appointed  for 
life,  had  its  origin  in  the  Windham  Act  of  1902, 
dealing  with  the  division  and  purchase  of  estates 
by  tenants.  This  commission  now  handles  about  8,- 
000,000  pounds  per  year,  all  used  for  the  purchase 
and  division  of  estates. 

uThese  estates  may  be  purchased  at  a  voluntary 
sale  from  the  owners  or  (within  the  area  of  the  con- 
gested districts  board)  the  sale  may  be  made  on  com- 
pulsion. At  present  the  sales  are  almost  all  volun- 
tary. Since  its  inception  the  estates  commission  has 


290  Markets    and   Rural   Economics 

purchased  and  resold  about  8,000,000  acres,  valued 
at  90,000,000  pounds. 

uThe  congested  districts  board  is  a  larger  commis- 
sion, also  nominated  by  the  Government,  and  has  for 
its  object  the  division  and  sale  of  estates  in  nine  west- 
ern counties  of  Ireland,  where  the  congestion  of 
tenants  was  such  that  the  cottager  was  unable  to  make 
a  living  on  his  small  parcel  of  ground.  This  board 
has  purchased  land  worth  perhaps  3,000,000  pounds, 
of  which  it  has  sold  about  1,000,000  pounds  to  date. 

uThe  procedure  is  about  as  follows:  a  large  estate, 
perhaps  entirely  in  pasture  land,  is  put  up  for  sale. 
The  officials  appraise  it  with  reference  to  its  pro- 
ductiveness. If  the  price  asked  by  the  owner  is  sat- 
isfactory the  estate  is  purchased,  and  the  owner  paid 
in  Government  land,  scrip,  or  stock  bearing  3  per 
cent,  interest.  Hitherto  the  voluntary  seller  has  been 
given  a  bonus  of  12  per  cent,  of  the  purchase  price, 
but  this  bonus  seems  to  have  been  withdrawn  re- 
cently. 

"Estates  sold  under  compulsion  the  Government 
must  pay  for  in  cash.  As  a  matter  of  fact,  there  are 
three  methods  of  payment  for  land:  (a)  in  stock, 
the  usual  and  immediate  payment  method;  (b)  in 
cash,  an  option  which  is  rarely  resorted  to,  since  the 
prospective  seller  must  in  this  case  await  his  turn,  for 
cash  sales  are  often  very  long  delayed;  (c)  or  partly 
in  cash  and  partly  in  scrip. 

uOnce  purchased,  the  estate  is  divided  into  tracts 
of  25  or  30  acres;  line  walls  are  built  if  necessary, 
a  house  is  constructed  at  a  cost  of  about  200  pounds, 
and  the  place  is  sold  to  a  tenant,  preferably  a  former 
tenant  on  the  estate,  sometimes  a  purchaser  from 
some  other  district.  Since  there  are  frequently  2$  to 
40  applicants  for  each  holding  it  is  not  difficult  to 


Markets   and   Rural   Economics  291 

find  honest,  capable,  industrious  purchasers.  Very 
often  an  estate  is  purchased  by  the  tenants  thereon 
by  mutual  agreement  with  their  former  landlord  as  to 
purchase  price.  The  Government  buys  the  estate, 
pays  the  landlord  in  stock  or  scrip,  and  sells  it  in 
small  holdings  to  the  tenants,  who  thus  become  the 
debtors  of  the  State. 

uThe  small  holder,  who  may  have  no  capital — 
and  seldom  has  enough  to  stock  the  holding — pays 
at  present  3  per  cent,  interest  on  the  purchase  price 
and  one-half  of  i  per  cent,  amortization,  or  a  total 
of  3^  per  cent.,  payable  in  semi-annual  installments. 
This  rate  amortizes  the  debt  in  about  62  years.  The 
purchaser  is  given  a  title  to  the  land,  pays  taxes  on  it, 
and  may  transfer  his  equity  at  any  time  he  chooses. 

"Out  of  the  90,000,000  pounds  sold  the  failures 
to  pay  the  installments  promptly  have  been  incon- 
siderable. In  the  county  of  Cork  the  defaults  have 
been  nil.  In  case  of  default  or  failure  the  installments 
are  paid  out  of  the  county  exchequer,  hence  the  tend- 
ency to  pay  promptly  is  warmly  applauded  and  the 
slow  payer  is  frowned  upon.  The  results  of  this  sys- 
tem seem  to  be  excellent." 

We  find  on  page  662  the  following  from  Mr.  Dop, 
vice-president  of  the  International  Institute  of  Agri- 
culture : 

"Agricultural  Credit  in  France  is  cheap;  and  this, 
in  my  opinion,  is  one  of  its  most  important  features. 

"The  problem  of  how  to  discount  agricultural  paper 
at  the  lowest  possible  rate  is  the  real  difficulty  in 
any  agricultural  credit  system.  To  rescue  the  farmer 
from  the  evils  of  mortgage  credit,  often  from  the 
bondage  of  usury,  and  to  secure  him  loans  at  a  lower 
rate  of  interest  than  is  usually  required  by  ordinary 
banks  would  seem  to  be  a  difficult  and  even  an  im- 


292  Markets    and  Rural   Economics 

possible  task.  Yet  the  problem  has  been  solved  in 
France  in  a  most  practical  and  profitable  manner,  as 
the  rate  of  interest  charged  the  farmer  varies  from 
2  to  5  per  cent.,  according  to  the  length  of  time  for 
which  the  loan  is  made. 

uTo  organize  agricultural  credit  so  that  it  may  be 
adaptable  to  all  the  requirements,  to  all  the  needs,  to 
all  the  incidents  which  may  arise  in  the  complex  busi- 
ness of  the  farming  industry  is  an  ideal  which  it 
would  seem  difficult  to  attain  without  derogating  from 
the  basic  principles  and  without  weakening  the  very 
foundations  on  which  the  edifice  of  rural  wealth  re- 
poses. Yet  this  seeming  impossibility  has  been  ren- 
dered possible,  thanks  to  the  good  will  and  the  ability 
of  our  legislators,  and  thanks  more  especially  to  the 
suppleness  of  the  organization  which  they  have  built 
up  to  meet  the  varied  needs  of  our  farmers. " 

Mr.  Wolf,  on  Cooperative  Banking  (page  244) 
says: 

uAnother  most  successful  offshoot  of  the  landschaft 
system  is  the  Boden  Credit  Institute  of  Hungary, 
which  has  to  some  extent  been  based  upon  the  pos- 
session of  an  independent  capital  figuring  as  a  re- 
serve fund.  In  addition  to  the  1,000,000  crowns 
(something  over  40,000  pounds)  granted  by  the  Gov- 
ernment, 209  founders  subscribed  collectively  13,900 
pounds,  with  liability  for  nine  times  the  same  amount, 
held  in  reserve.  This  seems  to  have  been  considered 
necessary  for  making  the  institution  go  on  new,  un- 
tried ground. " 

I  respectfully  submit  that  no  cooperative  institu- 
tion for  providing  cheap  money  on  farm  lands  would 
be  able  to  start  off  of  its  own  initiative  without  the 
help  of  some  outside  capital  furnished  by  the  State, 
or  by  individuals,  to  enable  it  to  make  a  start. 


Markets   and  Rural  Economics  293 

Wolf  further  says: 

"Gone  it  certainly  has,  and  that  exceedingly  well. 
So  well  as,  in  course  of  time,  to  suggest  the  forma- 
tion of  a  similar  institute  for  mortgage  loans  for 
peasant  lands.  The  Boden  Credit  Institute  is  intended 
for  large  properties  only.  It  grants  no  loans  below 
the  amount  of  2,000  crowns  (or  $400)  ;  and  the  ma- 
jority of  its  advances  to  landowners  are  above  that 
amount. " 

On  page  249,  Wolf  says : 

"The  Government  institutions  have  plainly  done 
good,  and  have,  above  all  things,  achieved  their  par- 
ticular purpose  of  bringing  appropriate  assistance  to 
the  small  agriculturist." 

On  page  50,  Wolf  says: 

"The  Government  institutions  have  certainly  suc- 
ceeded exceedingly  well — better  than  our  own  joint- 
stock  companies  formed  for  the  same  purpose,  and 
that  without  loss  to  the  taxpayer." 

Wolf  (p.  253)  says: 

"The  State-endowed  institutions  then  have,  on  the 
whole,  not  a  bad  record  to  exhibit.  They  have  placed 
money  within  the  reach  of  the  peasant  proprietor, 
who  was  previously  too  small  for  the  savings  banks, 
which  are  abroad  the  great  purveyors  of  mortgage 
money,  to  look  at,  since  his  business  was,  in  each  in- 
dividual case,  only  petty  and  troublesome;  who,  fur- 
thermore, if  not  too  small,  was  at  any  rate  too  dis- 
tant from  the  pay  office  of  the  landschaften  to  deal 
with,  and  who  was  deemed  altogether  unworthy  of 
the  notice  of  the  joint-stock  mortgage  banks.  They 
have  done  this  in  an  efficient,  appropriate  way  by 
stationing  their  officers  in  every  district  and  making 
application,  valuation,  and  borrowing  decidedly  easier 
for  those  peasantry." 


294  Markets   and   Rural   Economics 

On  page  256,  Wolf  says: 

"They  are  borrowers'  institutions.  They  may  be 
regarded  as  landschaften  with  the  cramping  and  ham- 
pering features  of  those  institutions  removed.  They 
are  borrowers'  institutions,  which  admit  any  agricul- 
tural borrowers  as  members  who  desire  to  become  so 
in  their  district.  In  respect  to  one  point,  they  have 
departed  rather  materially  from  the  principle  of  the 
landschaften.  Persons  desirous  of  furthering  the 
movement  are  eligible  as  well,  and  many  of  them  do 
take  shares.  In  Saxony  such  members  are  required 
to  be  either  agriculturists  or  land-owners.  The  idea 
of  proceeding  without  a  command  of  ready  cash  ap- 
pears to  have  presented  itself  to  the  originator  of  this 
modern  movement  as  so  inconsistent  with  business 
principles  that  in  both  of  the  two  countries  to  provide 
the  first  working  funds  an  advance  from  the  Govern- 
ment was  accepted. 

"In  the  Saxony  society  it  amounted  to  37,500 
pounds,  and  was  paid  off  within  four  years.  In  the 
Bavarian  society  it  was  considerable,  beginning  with 
50,000  pounds,  advanced  free  of  interest,  and  an- 
other 50,000  pounds,  since  increased  to  200,000 
pounds,  advanced  at  3  per  cent,  interest." 

On  page  258,  Wolf  says: 

"Absence  of  funds  of  their  own  wrould  place  such 
institutions  at  the  mercy  of  the  confraternity  of  bank- 
ers. With  money  in  their  pockets,  the  societies  are 
able  to  meet  such  machinations,  and  to  regulate  the 
supply  of  the  market  so  as  to  keep  it  absolutely  at  a 
steady  quotation,  which  is  not  only  desirable  in  itself 
and  certainly  benefits  their  credit,  but  it  is  an  addi- 
tional specially  important  to  their  members." 

Cahill,  on  page  21,  mentions,  as  one  of  the  char- 
acteristic features  of  the  State,  provincial,  and  dis- 


Markets   and   Rural   Economics  295 

trict  mortgage  banks  "a  certain  decentralization  of 
business  by  the  utilization  of  local  officials." 

And,  on  page  30,  Cahill  says: 

"The  organization  of  the  latter,"  meaning  the 
joint-stock  land-mortgage  banks,  uwas  not  capable  of 
sufficient  decentralization  consistent  with  adequate  re- 
turns upon  the  expenses  incurred  by  the  maintenance 
of  local  representatives  or  offices  necessary  for  such 
business.  In  the  case  of  the  other  banks  which  limit 
their  operations  to  a  province  or  a  small  district, 
adequate  knowledge  of  intending  borrowers  and  su- 
pervision over  mortgaged  estates  is  more  easily  se- 
cured, and  the  general  expenses  of  administration  are 
reduced  by  the  fact  that  their  administration,  apart 
from  those  actually  in  permanent  office  employment, 
is  largely  honorary;  nor  were  the  land-mortgage  banks 
inclined  to  seek  such  business." 

1890  New  Zealand  was  the  worst  bankrupt  coun- 
try on  earth.  A  population  of  three-quarters  of  a 
million  had  a  public  debt  of  two  hundred  millions  of 
dollars. 

In  a  total  area  of  sixty-six  millions  of  acres,  one 
hundred  and  eleven  persons  and  corporations  held 
seventeen  millions  of  acres,  while  much  of  the  re- 
mainder was  held  in  large  bodies. 

In  that  thinly  settled  country  emigration  had  set 
in,  and  in  one  year  some  twenty  thousand  persons 
emigrated  to  Australia  and  other  countries. 

The  government  has  broken  up  many  of  the  large 
landed  estates,  paying  the  owners  the  market  value, 
and  then  selling  the  lands  to  farmers  on  all  the  time 
they  want  up  to  thirty-six  years,  with  interest  around 
4  per  cent,  per  annum.  If  the  farmers  lack  working 
capital,  it  is  loaned  them  on  easy  terms,  with  interest 
rates  not  over  4%  per  cent,  per  annum. 


296  Markets    and  Rural   Economics 

The  population  has  increased  in  twenty  years 
(1890-1910)  from  750,000  to  1,070,000.  Of  the 
66,000,000  acres  in  the  country,  over  14,000,000 
acres  were  privately  owned  in  1910. 

It  is  to-day  the  wealthiest  country  per  capita  in 
the  world,  and  its  wealth  is  more  widely  distributed 
among  the  people  than  any  others,  except  possibly 
Switzerland  and  Denmark. 

In  1910  its  foreign  trade  was  one  hundred  and 
ninety-six  millions  of  dollars,  or  $183  per  capita.  The 
same  per  capita  rate  in  the  United  States  would  give 
us  a  foreign  trade  of  seventeen  billions  of  dollars, 
or  about  three  hundred  per  cent,  more  than  we  had. 

If  Monarchies  and  Republics  in  other  parts  of  the 
world  can  step  down  from  their  lofty  perch  and  do 
these  things,  and  we  can  not,  which  do  you  suppose 
will  appeal  to  the  people  of  this  class  as  the  better 
government  for  them?  It  is  not  philanthropy;  it  is 
not  charity;  it  is  not  giving  anything  to  anybody;  it 
is  statesmanship. 

However,  we  all  know  that  to  go  into  reckless 
loans  loosely  administered  would  result  in  a  calamity. 
We  should  not  develop  a  hot-house  nursery  for  the 
incapable,  neither  should  we  ignore  and  neglect  so 
important  a  part  of  our  population  as  those  who  pro- 
duce half  the  food  and  the  raw  material  for  the  rai- 
ment that  is  produced  in  the  United  States.  Every 
other  bite  you  eat  comes  from  the  bounty  of  their 
hands;  every  other  article  of  raiment  you  use  comes 
from  the  sweat  of  their  brows. 

Need  of  laborers. — If  some  one  should  say  that 
we  would  have  no  laborers  if  they  were  allowed  to 
own  land  of  their  own,  I  will  say  that  when  I  hear 
of  the  dearth  of  labor  I  rejoice;  for  I  know  that 
means  that  all  who  are  worthy  are  employed.  But 


Markets   and   Rural   Economics  297 

when  I  hear  of  millions  out  of  work  I  am  alarmed: 
I  know  there  is  wretchedness  and  danger.  Old  Rome 
used  to  try  to  solve  the  unemployed  problem  by  using 
them  in  the  cities  on  public  works  and  private  ex- 
travagance, with  feasts  and  amusements  thrown  in. 
We  all  know  how  much  of  a  remedy  that  was. 

Source  of  Funds. — If  the  Government  should  ad- 
vance money,  how  should  it  be  obtained?  That  de- 
pends upon  whether  we  have  sufficient  money  to  an- 
swer the  demand  or  not.  It  can  be  secured  by  de- 
posits from  the  Treasury,  by  selling  bonds,  or  by  the 
issue  of  Treasury  notes  in  like  manner  as  is  provided 
under  the  new  banking  and  currency  act  which  is  to 
answer  the  needs  of  purely  commercial  business. 

Class  Legislation. — We  expect  the  charge  of  class 
legislation  is  to  be  presented.  It  all  depends  on  what 
we  define  as  class  legislation.  If  it  means  legisla- 
tion that  is  for  one  class  at  the  expense  or  to  the 
injury  of  another,  then  this  is  not  class  legislation. 
If  class  legislation  means  legislation  that  favors  one 
class  without  injury  to  another,  this  is  class  legisla- 
tion. If  class  legislation  means  legislation  that  ben- 
efits one  class  with  indirect  benefits  to  another,  then 
it  is  class  legislation.  I  wonder  how  many  laws  are 
on  the  statute  books  that  do  not  come  under  the  head 
of  class  legislation  under  such  constructions. 

LESSON  XLII 

1.  What  is  meant  by  the  "Gold  Standard  ?" 

2.  What  is  the  process  of  rediscounting  commer- 
cial paper  through  a  Federal  reserve  bank? 

3.  Unless  the  farmer  owns  banks  that  belong  to 
the  Federal  reserve  union,  how  many  tolls  will  he  have 
to  pay  on  the  money  which  the  government  issues  to 


298  Markets    and  Rural   Economics 

regional  banks  when  he  rediscounts  his  agricultural 
paper  to  secure  it? 

4.  Give  the  leading  features  of  the  rural  credits 
bill  prepared  by  the  United  States  Commission  ap- 
pointed to  investigate  rural  credit  abroad  in  1913? 

5.  In  what  ways  was  it  similar  to  the  European 
system,  and  in  what  ways  did  it  differ  from  all  of 
them? 

6.  What  is  the  legitimate  function  of  money? 

7.  What  is  "financial  banking"? 

8.  Name   four  things  which  rural  credits  should 
give  that  no  bill  drafted  and  no  report  of  any  public 
committee  on  finance  ever  proposed  prior  to  1913  ? 

9.  Is  there  a  bank  anywhere  that  allows  depositors 
a  vote  in  its  management? 

10.  Form  an  amortization  table  to  show  how  it 
operates. 

1 1.  Tell  something  of  the  failure  of  land  mortgage 
banks. 

12.  Give  the  fundamentals  of  rural  credits. 

LESSON  XLIII 

1.  Do   our   public   expenditures    about   equal   our 
volume  of  money? 

2.  What  is  the  most  prosperous  agricultural  sec- 
tion of  the  United  States? 

3.  How  do  you  account  for  it? 

4.  Why  do  eighteen  of  our  largest  insurance  com- 
panies loan  one  fourth  of  all  they  place  in  land  mort- 
gages in  one  State? 

5.  Would  safe  debenture  investments  tend  to  cause 
absentee  landlords  to  sell  to  renters  ? 

6.  What  is  the  position  of  Mr.  H.  W.  Wolf  on 


Markets   and  Rural  Economics  299 

the  subject  of  government  aid  to  short-time  personal 
credit  banks,  and  what  are  his  reasons? 

7.  How  would  rural  credits  help  the  farmer  to  re- 
tain and  keep   revolving  in  the  country  the  money 
his  crops  bring  ? 

8.  What  is  the  policy  of  Denmark  in  helping  rent- 
ers become  home-owners  ? 

9.  What  is  England  doing  for  the  Irish  peasants? 

10.  What  is  the  Hungarian  method  of  land  banks? 

11.  What  of  German  provinces? 

12.  What  can  you  say  of  the  conduct  of  Nfew  Zea- 
land on  this  subject? 


CHAPTER  XXIX 

COST  OF  LIVING 

There  are  a  few  cardinal  fundamentals  in 
Economics : 

1 i )  There  is  no  end  to  the  useful  work  that  needs 
to  be  done. 

(2)  Cost  is  relative,  and  prices  and  cost  of  living 
are  distinctly  different  things. 

(3)  The  human  species  can  exist  on  a  very  small 
margin  of  supply,  yet  can  consume,  or  use,  an  unlim- 
ited  amount   of   things    desirable,   measured  by   the 
power  to  produce. 

It  is  quite  possible  for  the  people  of  a  community 
to  produce  more  of  certain  commodities  than  it  can 
consume. 

It  is  quite  possible  for  people  engaged  in  a  certain 
line  of  industry  to  produce  more  than  can  be  marketed 
at  a  fair  price. 

But  it  is  impossible  for  mankind  to  produce  more 
than  it  can  profitably  use  and  enjoy  under  a  high 
standard  of  civilization,  provided  the  industries  are 
properly  proportioned  among  the  various  departments 
of  human  activity.  The  difficult  thing  is  to  secure 
the  proper  adjustment.  There  is  not  a  time  when 
labor  could  not  be  profitably  used  in  manufacturing, 
in  improvement  of  farms,  building  roads,  providing 
drainage,  irrigation  for  production,  sanitation,  con- 
structing, beautifying,  etc. 


Markets   and  Rural   Economics  301 

Idle  labor  is  a  sign  of  maladjustment  of  industry. 
Revolutions  are  the  landmarks  of  bad  statesmanship. 
Lack  of  employment  results  from  dearth  of  money 
with  which  to  pay  for  service — of  lack  of  demand  for 
service.  The  condition  of  labor  being  plentiful  and 
service  being  needed,  and  yet  idle  hands  being  in 
abundance,  indicates  an  unwillingness  of  the  workers 
to  accept  the  wages  offered  and  the  unwillingness 
of  the  employers  to  give  the  wages  demanded. 

Dearth  of  money  may  result  from  lack  of  sufficient 
volume  of  money  in  circulation,  or  from  a  concen- 
tration of  money  in  certain  places,  and  consequently 
the  idleness  of  hands  in  the  communities  drawn  on 
for  cash.  The  margin  upon  which  people  can  exist 
and  the  amount  they  will  consume  if  they  possess 
the  money  necessary,  determines  the  demand.  The 
constancy  of  employment  of  all  manual  and  brain 
workers  determines  the  bountifulness  of  production. 
The  power  to  consume  determines  the  demand,  and 
the  price  regulates  the  amount  that  can  be  profitably 
marketed. 

Price  is  relative.  It  is  quoted  in  terms  of  dollars. 
High  price  of  articles  of  commerce  or  of  service 
means  low  price  of  money.  If  things  we  buy  are 
cheap,  money  is  dear.  If  the  price  of  money  is  low, 
the  price  of  everything  measured  by  it  is  high. 

Legitimate  cost  is  cost  of  economical  production 
and  economical  distribution.  All  other  expenses  are 
useless  and  constitute  a  parasitic  tax  on  the  energies 
of  mankind. 

The  purchasing  power  of  labor  is  the  only  stand- 
ard by  which  to  judge  fluctuations  in  price. 

When  prices  of  commodities  go  up  and  remunera- 
tion for  work  goes  up  at  the  same  rate  the  cost  of 
living  is  not  increased. 


302  Markets    and  Rural   Economics 

When  prices  of  commodities  go  down  and  re- 
numeration  for  work  goes  down  at  the  same  rate  the 
cost  of  living  is  not  decreased. 

When  prices  of  commodities  remain  the  same  and 
renumeration  for  work  increases  the  cost  of  living  is 
lowered. 

When  prices  of  commodities  remain  the  same  and 
renumeration  for  work  decreases  the  cost  of  living 
is  raised. 

Prices  and  renumeration  for  work,  on  the  whole,  go 
up  or  down  as  the  volume  of  money  increases  or 
diminishes.  High-cost  living  or  low-cost  living  is  not 
determined  by  the  general  level  of  prices.  It  is  de- 
termined by  the  purchasing  power  of  labor,  and  not 
by  the  purchasing  power  of  the  money  paid  to  labor. 
Let  us  consult  the  government  reports  for  a  moment 
and  see  how  many  hours  those  engaged  in  different 
occupations  work  to  earn  one  dollar. 

These  figures  are  estimates  based  on  the  average 
wages  paid  on  the  farm,  and  the  average  paid  to 
workers  in  the  other  vocations  mentioned,  without 
any  line  of  distinction  being  drawn  between  wages 
and  salaries.     Neither  is  there  any  cognizance  taken 
of  the  difference  in  the  cost  of  living  on  the  farm  and 
in  the  towns  and  cities. 
Mechanic  working  on  plows,  hoes,  har- 
vesters and  reapers 3       hours 

Wagon  and  harness  makers 3%  hours 

Railroad  employees  engaged  in  transport- 
ing products  of  the  farm  to  market.  .  .    2%  hours 
Farmers,  based  on  farm  values,  1911..  .  .10       hours 
To  make  this  clearer,  the  mechanic  who  works  in 
factories   making   the   plows,    hoes,    harvesters   and 
other  implements  that  the  farmers  use,  to  earn  one 
dollar  works  three  hours.     The  automobile,  wagon- 
and  harness-maker,  for  the  farmer's  use,  works  31/0 


Markets   and  Rural   Economics  303 

hours.  The  railroad  employee  who  runs  the  trains 
which  haul  the  products  of  these  farmers  to  market 
works  2^/2  hours  to  earn  one  dollar.  The  farmer, 
who  does  all  the  work  of  producing,  takes  all  the 
risk  of  drought  and  other  hazards  that  go  with  farm- 
ing, works  10  hours  to  earn  one  dollar.  Is  such  a 
division  indicative  of  equity? 

The  market  cost  of  living  affects  the  farmer  least 
of  all  classes,  for  the  reason  that  he  produces  so 
large  a  part  of  his  living  at  home.  True,  the  cost 
of  production  determines  the  cost  of  living,  but  this 
item  does  not  reach  the  farmer  so  acutely  as  it  does 
the  urban  laborer  who  must  purchase  in  the  open 
market  everything  he  uses  with  the  wages  he  secures. 

The  effect  of  an  increase  in  the  volume  of  money 
is  to  raise  the  general  level  of  commercial  values,  and 
vice  versa.  Wages  and  salaries  soon  follow,  but  do 
not  go  up  or  down  simultaneously  with  the  rise  or 
fall  of  commodity  prices.  As  the  increasing  supply 
of  the  life  blood  of  commerce  enters  the  channels  of 
trade  it  stimulates  business  and  accelerates  the  move- 
ments of  material  progress.  And  the  reverse  effect 
follows  a  withdrawing  of  money  from  circulation. 
The  advantages  of  increasing  prices  to  the  producer 
due  to  an  increasing  volume  of  money  is  not  offset 
by  an  equal  disadvantage  to  the  consumer,  as  in  the 
case  when  artificial  causes  raise  prices  to  the  con- 
sumer without  any  corresponding  advantage  to  the 
producer. 

The  causes  of  the  high  price  of  living  are  three : 

1 i )  Increase  in  money  supply  and  credits. 

(2)  Monopoly  extortion. 

(3)  Economic  waste. 

The  first  leads  to  higher  standards  of  living,  and 


304  Markets    and  Rural   Economics 

operates  to  increase  prices  to  the  producer,  the  dis- 
tributer and  consumer. 

Just  where  the  benefits  derived  from  an  increase 
of  money  supply  reaches  the  point  of  diminishing 
returns  is  specifically  indeterminate.  The  increased 
activities  resulting  from  a  gradually  expanding  sys- 
tem of  credits  based  on  money  and  tangible  wealth 
have  made  this  country's  progress  the  marvel  of  the 
centuries.  While  the  constant  need  for  readjustment 
of  wages  and  salaries  to  changing  price-levels  in- 
evitably lead  to  hardship  to  certain  individuals,  it  has 
nothing  charged  to  it  so  disastrous  as  results  from 
the  reverse  process — decreasing  money  volume,  de- 
creasing credit,  and  decreasing  industrial  activity. 
The  power  to  consume  is  gauged  by  the  remuneration 
received  for  labor  and  its  products.  The  purchasing 
power  of  the  remuneration  must  keep  pace  with  the 
inflation  of  values  or  the  point  of  diminishing  returns 
is  reached. 

The  complaint  of  high  cost  is  world-wide.  Every 
nation  is  experiencing  in  varying  degrees  the  same 
process.  So  there  must  be  a  world  influence  as  well 
as  a  national  influence  effecting  an  upward  trend  of 
commercial  values. 

The  World's  Stock  of  Gold. 

In  1 890  the  world's  stock  of  gold  was  $7,966,000,000 
In  1900  "  "  "  "  "  "  10,000,000,000 
In  1905  "  "  "  "  "  "  11,000,000,000 
In  1910  "  "  "  "  "  "  13,800,000,000 
(N.  B. — "Stock"  does  not  mean  "coin.") 

The  gold  money  in  Europe  and  the  United  States 
in  1910  was  $5,850,000,000. 

All  kinds  of  money  in  the  same  countries  in  1910 
totaled  $12,827,000,000. 


Markets   and  Rural   Economics  305 

Commercial  agencies  have  worked  out  what  is 
termed  an  "Approximate  Price  Index,"  which  is  the 
totals  of  the  prices  by  the  pound  of  96  articles  of 
general  consumption.  That  Price  Index  showed  for 
1895,  6.8;  1901,  7.5;  1904,  7.9;  1907,  8.9;  1910, 
9.2;  1912,  10. 

The  world's  stock  of  gold  coin  in  1893  was  $3,- 
900,000,000;  the  heritage  of  four  centuries  of  min- 
ing. The  world's  production  of  gold  from  1893-1910 
was  $5,152,000,000,  the  work  of  seventeen  years. 

One  dollar  would  purchase,  in  1910,  as  compared 
to  1896,  48c  worth;  in  foods  other  than  meats,  65C 
worth;  in  all  other  commodities,  67C  worth;  in  all 
commodities,  6oc  worth. 

A  great  deal  of  this  rise  has  taken  place  in  the 
process  of  distribution.  Mr.  Alfred  L.  Webb,  stew- 
ard of  the  Ringling  Brothers'  Circus  for  fifteen  years, 
says:  "It  costs  me  only  one  cent  more  for  each  per- 
son in  serving  a  meal  for  the  circus  than  it  did  four- 
teen years  ago.  I  know  from  the  running  expenses 
of  my  home  that  the  cost  of  living  has  increased 
about  fifty  per  cent.  But  the  circus  escapes  because 
we  cut  out  the  middleman." 

ECONOMIC  WASTE 

The  causes  of  the  high  cost  of  living  are  many 
under  the  division  of  Economic  Waste.  This  waste 
is  due  to  two  causes:  (i)  crude  methods;  (2)  para- 
sites. 

Under  crude  methods  may  be  classed  all  wasted 
energies  used  in  ( i )  doing  foolish  things  because  of 
bad  judgment;  (2)  doing  with  crude  or  inadequate 
tools  or  machinery,  and  therefore  getting  poor  re- 
turns for  the  energy  exerted. 


306  Markets    and   Rural   Economics 

Under  parasites  there  are  two  divisions:  (i)  the 
idle  parasite,  and  (2)  the  industrious  parasite. 

Under  idle  parasite  are  two  divisions :  ( i )  the 
idle  from  choice;  (2)  the  idle  from  inability  to 
work.  This  second  class  has  two  divisions :  ( i ) 
those  unable  to  work  for  lack  of  employment;  (2) 
those  unable  to  work  because  of  physical  inability. 

The  industrial  parasite  is  the  one  doing  some- 
thing that  is  unnecessary,  something  that  can  be  done 
away  with,  or  that  is  a  mere  duplication  of  what 
another  is  doing  in  the  same  way  when  either  could, 
do  all  that  is  necessary  in  that  business  at  that  place. 

This  latter  class  is  by  far  the  greatest  burden  now 
being  carried  by  the  working  men  and  the  working 
women  of  the  world. 

LESSON  XLIV 

Name  three  fundamental  principles  in  economics. 

Is  it  possible  for  man  to  get  done  all  the  work 
that  he  wants  to  have  done? 

Of  what  is  voluntary  idleness  a  sign? 

What  determines  demand? 

What  determines  the  bountifulness  of  production? 

What  regulates  the  amount  that  can  be  profitably 
marketed? 

What  is  the  relationship  between  the  price  of 
money  and  the  price  of  commodities? 

What  is  legitimate  cost? 

What  is  the  only  true  standard  by  which  to  judge 
fluctuations  in  price?  Illustrate. 

By  what  is  the  cost  of  living  determined? 

LESSON  XLV 

State  the  number  of  hours  it  takes  a  man  to  earn 
a  dollar  at  different  kinds  of  work. 


Markets   and  Rural   Economics  307 

Why  does  the  market  cost  of  living  affect  the 
farmer  least  of  all? 

What  are  the  causes  for  high  price  of  living? 

Explain  how  the  first  operates. 

What  has  been  the  record  of  the  world's  stock 
of  gold? 

What  is  an  "approximate  price  index?1' 

What  is  the  difference  between  "stock"  and  "coin"? 

What  can  you  say  as  to  the  changes  in  the  pur- 
chasing value  of  a  dollar? 

What  two  causes  result  in  economic  waste? 

Name  the  subdivisions  of  each. 

What  would  you  suggest  as  a  remedy? 


CHAPTER    XXX 

COST  OF  LIVING,  CONTINUED 

Among  the  things  that  produce  both  idle  and  in- 
dustrious parasites  may  be  mentioned  the  following: 

1 .  Over-capitalization. 

2.  Monopoly. 

3.  Capitalized  earnings. 

4.  Wasteful  methods  of  distribution. 

5.  Excessive  government  tax. 

6.  Excessive  Fraternal  tax. 

7.  Individual   extravagance    (bad  habits). 

8.  Growth  of  cities  at  expense  of  country. 

9.  Interest  burden  paid  by  industry. 

10.  Credit  buying  (and  piece-meal  buying  by  tele 
phone). 

Each  and  all  of  these  lead  to  parasitism,  and,  taken 
with  this  waste  of  natural  resources  through  ignor- 
ance or  neglect,  completes  the  agencies  contributing 
to  high  cost  of  living,  and  unnecessary  labor. 

OVER-CAPITALIZATION 

Capital  stock  is  the  amount  allowed  to  be  issued 
or  sold  to. stockholders.  It  is  supposed  to  cover  three 
kinds  of  assets:  (i)  cash;  (2)  real  property;  (3) 
possibilities  and  good  will.  Over-capitalization 
means  the  capitalization  of  intangible  property. 
Shares  covering  this  intangible  assumption  of  future 
wealth  do  not  cost  anything  and  are  usually  appro- 
priated by  the  promoters  or  sold  at  a  great  discount 
to  induce  people  to  take  stock  in  the  hope  of  un- 
earned dividends. 

Conservative  estimates  place  over-capitalized  stock 


Markets   and  Rural   Economics  309 

that  has  been  floated  in  this  country  and  outstand- 
ing today  at  $30,000,000,000.  On  this  stock,  divi- 
dends of  about  $1,500,000,000  each  year  are  being 
paid,  amounting  to  about  $18  a  person  or  nearly 
$100.00  to  each  family  of  the  nation.  This  com- 
mercial tax  can  come  from  but  one  or  both  of  two 
sources:  from  the  producer,  in  low  prices  or  wages; 
and  from  the  consumer  by  high  prices.  The  over- 
capitalization of  an  industry  means  the  capitaliza- 
tion of  intangible  property  and  "good  will"  with  the 
payment  of  unearned  dividends.  The  dividends  are 
earned  in  the  commercial  sense,  but  not  in  the  sense 
of  just  recompense  being  given  by  the  original  pos- 
sessor of  the  watered  stock.  If  the  earnings  of  the 
company  are  capitalized  until  watered  stock  has  phys- 
ical value  behind  it — worth  face  value,  the  possessor 
is  in  very  much  the  same  attitude  toward  the  public 
that  the  land  speculator  is  who  has  "grown"  rich  by 
unearned  increment,  or  appreciation  of  land  values. 

The  impossibility  of  paying  dividends  on  counter- 
feit capital  and  maintaining  a  company  against  a 
competitor  not  over-capitalized  is  evident,  unless  the 
over-capitalized  company  has  the  advantage  of  po- 
sition, franchise,  commercial  or  financial  monopoly. 
This  directs  our  attention  to  the  subject  of  how  mo- 
nopolies are  secured  and  maintained. 

In  a  minority  report  of  the  Steel  Trust  Investi- 
gating Committee  of  Congress,  the  Committee's  in- 
vestigation revealed  that  directors  of  the  United 
States  steel  corporation,  through  stock  ownership 
and  places  on  the  directorates  of  the  great  railway 
systems  of  the  United  States  have  a  controlling  voice 
in  nearly  55  per  cent,  of  the  railroads  of  the  country, 
according  to  a  statistical  study  prepared  for  the  Stan- 
ley Steel  Investigating  Committee  of  the  House. 


3io  Markets    and  Rural   Economics 

"By  means  of  interlocking  directorates  18 
financial  institutions  in  New  York,  Chicago,  and  Bos- 
ton are  dominant  factors  in  the  management  of  134 
corporations  with  an  aggregate  capital  of  $25,325,- 
000,000. 

"The  partners  and  directors  of  these  18  insti- 
tutions hold  38  5  directorships  in  41  banks  and  trust 
companies  with  deposits  of  $2,834,000,000,  and  they 
represent  through  their  own  institutions  the  manage- 
ment of  $25,325,000,000.  They  hold  155  director- 
ships in  31  railroads  having  a  total  capitalization  of 
$12,193,000,000;  50  directorships  in  n  insurance 
companies  with  total  assets  of  $2,646,000,000;  98 
directorships  in  28  producing  and  trading  companies 
with  a  total  capitalization  of  $3,583,000,000,  to  say 
nothing  of  the  various  public  utilities  corporations 
with  annual  gross  earnings  of  $428,000,000. 

"Five  of  these  18  institutions — J.  P.  Morgan  & 
Company;  the  Guaranty  Trust  Company;  the  Bank- 
ers' Trust  Company;  the  First  National  Bank;  and 
the  National  City  Bank — through  344  interlocking 
directors,  have  tentacled  allied  corporations  with  re- 
sources of  $22,24^,000,000." 

The  practice  of  capitalizing  the  earnings  of  cor- 
porations has  covered  up  the  tracks  of  graft  in  the 
march  of  monopolization. 

When  earnings  are  invested  in  more  property  or 
in  improvements  instead  of  being  distributed  as  divi- 
dends it  eliminates  the  water  and  fills  in  with  sub- 
stantial wealth  the  vacuum  of  over-capitalized  stock. 
When  the  stockholders  get  restive  for  more  of  the 
emoluments  of  prosperous  business  the  company  may 
declare  a  dividend  in  the  form  of  additional  stock. 
This  allows  the  earnings  to  remain  in  the  treasury 
for  capital  stock  uses.  It  also  pacifies  the  stockhold- 


Markets   and   Rural   Economics  311 

er,  who  feels  that  he  has  a  stronger  pull  on  the  com- 
pany, that  will  increase  his  income;  but  as  it  does 
not  increase  the  earning  power  above  what  it  would 
be  without  the  issuing  of  treasury  stock  in  this  man- 
ner, merely  lowers  the  rate  of  dividends  due  the 
stockholders,  and  helps  to  appease  the  wrath  of  the 
public  who  pay  the  profits,  as  the  financial  reports 
of  the  company  will  thus  show  a  lower  rate  of  divi- 
dends to  the  stockholders.  Sometimes  all  this  is 
avoided  by  "cutting  a  melon" — paying  out  undivided 
profits  in  a  lump  sum,  not  as  dividends,  but  as  special 
apportionment  of  accumulated  surplus.  The  great 
majority  of  corporations  and  companies  do  not  earn 
for  their  owners  such  enormous  dividends  as  to  ex- 
cite the  cupidity  or  envy  of  the  public.  Many  go  to 
the  wall  and  others  drag  along,  paying  little  or  no 
profit  to  their  owners.  It  is  the  big  corporation  with 
a  monopoly  that  can  show  such  phenomenal  business 
success. 

The  burden  of  over-capitalization  comes  in  the 
form  of  increased  cost  of  service  in  the  case  of  rail- 
roads; increased  cost  of  articles  of  necessity  and 
luxuries,  in  the  case  of  manufactories;  increased  cost 
in  the  price  of  merchandise  in  the  case  of  commer- 
cial companies,  and  so  on  through  the  list  of  corpo- 
rate companies  handling  the  material  necessities  of 
life.  No  one  who  produces  can  avoid  contributing 
to  this  counterfeit  capital  and  live  under  our  modern 
civilization. 

In  March,  1913,  Congress  passed  a  law  authoriz- 
ing the  Inter-State  Commerce  Commission  to  make 
a  physical  valuation  of  the  railroad,  telegraph  and 
telephone  companies.  Senator  La  Follette  worked 
for  this  measure  for  seven  years.  The  terms  of  as- 
certaining this  valuation  are : 


312  Markets    and   Rural   Economics 

1 i )  Original  cost. 

(2)  Cost  of  present  duplication. 

(3)  Other    values    and    elements    of    value — in- 
tangible values. 

The  wheels  of  progress  move  forward  and  read- 
justments have  to  be  made  regardless  of  the  incon- 
veniencies  such  readjustments  may  involve. 

LESSON  XLVI 

Name  the  causes  of  economic  parasites. 

What  is  capital  stock  supposed  to  cover? 

What  is  over-capitalization? 

What  is  its  purpose? 

What  was  the  estimated  amount  of  over-capitalized 
stock  in  the  United  States  in  1913? 

How  much  tribute  were  the  people  paying  on  this 
capital? 

How  can  an  over-capitalized  company  compete  with 
an  under-capitalized  company  in  the  same  business  and 
with  equal  opportunities  in  the  trade? 

What  did  the  report  of  the  Steel  Trust  Investiga- 
tion Committee  of  Congress  reveal  with  regard  to  in- 
terlocking directorates? 

How  may  watered  stock  become  prime  stock  with 
full  physical  value  behind  it? 

What  is  "unearned  increment?'' 

When  did  Congress  take  steps  to  ascertain  the  phys- 
ical value  of  railroads,  telegraph  and  telephone  com- 
panies? 


CHAPTER  XXXI 

COST  OF  LIVING,  CONCLUDED 

Excessive  taxes  are  a  fruitful  source  of  expense. 
Governments  are  used  by  self-seeking  place  hunters 
as  a  legitimate  prey,  as  a  source  of  support.  These 
place  hunters  and  hangers-on  have  influence  and  do 
not  hesitate  to  use  it.  Officials  are  often  forced  under 
conditional  duress  to  support  appropriations  that  they 
inwardly  oppose.  They  have  to  succumb  to  the  pres- 
sure or  be  eliminated  and  relieved  of  public  duty.  In 
no  instance  is  this  more  flagrantly  exemplified  than 
in  the  extravagance  shown  in  pension  appropriations. 
The  "pork  barrel"  method  of  cross-lifting  to  get  cer- 
tain measures  through  has  cost  many  millions  to  the 
taxpayers  in  both  state  and  national  legislation.  Ap- 
proximately one-half  of  the  national  expense  is  for 
war  and  the  concomitants  of  war.  There  is  scarcely 
a  department  of  the  government  that  is  not  run  at 
a  waste  of  money  as  compared  to  what  would  be 
expended  if  the  same  work  were  under  the  direction 
of  a  corporation. 

The  standard  of  living  of  individuals  and  com- 
munities is  as  a  rule  regulated  by  the  power  to  con- 
sume, which  is  measured  by  the  amount  of  money, 
or  its  equivalents,  that  is  handled.  As  more  money 
has  been  added  to  circulation,  and  the  consuming 
power  augmented,  the  standard  of  living  has  been 
raised.  An  increased  demand  stimulates  the  price, 


314  Markets    and   Rural   Economics 

which  in  turn,  other  things  being  equal,  stimulates 
production.  The  increased  demand  has  been  for 
manufactured  products  more  than  for  agricultural 
products.  This  called  for  more  urban  labor,  which 
was  drawn  from  the  country,  having  a  tendency  to 
reduce  the  power  to  produce  agricultural  products. 
The  demand  for  food  products  is  not  increased  by  one 
leaving  the  farm  and  going  to  the  city,  but  the  de- 
mand on  the  ones  left  on  the  farm  is  greater.  Such 
increased  demand  on  the  farmer  is  to  his  advantage, 
as  it  makes  for  high  prices  of  farm  products.  The 
raising  of  the  standard  of  living  on  the  farm  is  to 
the  advantage  of  the  city  laborer  as  it  creates  a  mar- 
ket for  his  products. 

Just  where  the  line  of  extravagance  begins  and 
ends  will  never  be  settled.  From  the  very  nature  of 
human  nature  it  is  impossible  of  settlement.  People 
without  taste  for  music,  art  or  literature  would  count 
it  inexcusable  extravagance  to  indulge  in  the  purchase 
of  any  of  the  thousand  and  one  things  which  are 
bought  and  enjoyed  by  people  of  culture  and  taste, 
and  are  considered  by  them  as  necessities.  There  are 
a  few  things  which  cost  large  sums  of  money  in 
the  aggregate,  generally  agreed  to  be  pure  extrava- 
gant indulgences,  and  which  have  been  handed  down 
from  generation  to  generation,  with  here  and  there 
an  addition  of  a  new  one,  to  add  to  the  useless  bur- 
dens of  the  world. 

We  have  other  burdens  to  carry  which  some  would 
class  as  necessary  and  therefore  not  agree  for  their 
listing  as  extravagances.  I  refer  to  our  fraternal 
taxes.  Agreeing  that  fraternal  dues  and  fees  go  to 
a  good  purpose  we  are  beyond  question  surfeited  with 
fraternities  and  overloaded  with  the  tax  necessary  to 
maintain  them.  They  do  duplicating  work  and  fill 


Markets   and  Rural  Economics  315 

similar  offices  in  the  structure  of  society.  Our  insur- 
ance bills,  both  life  and  fire,  are  heavier  than  they 
ought  to  be.  They  duplicate  work  and  expenses  and 
are  therefore  far  more  expensive  than  good  economics 
would  justify,  or  the  people  themselves  would  toler- 
ate, if  the  same  tax  were  levied  arbitrarily  and  used 
for  the  same  purpose. 

Dr.  F.  K.  Hoffman,  of  the  Prudential  Life  Insur- 
ance Company,  says  that  the  33,000,000  persons 
gainfully  employed  as  wage  earners  sustain  an  an- 
nual loss  of  $366,000,000  in  wages  because  of  sick- 
ness; and  for  medical  expense  $248,000,000,  one- 
third  of  which  is  preventable.  There  are  constantly 
3,000,000  people  seriously  ill  in  the  United  States. 

We  sustain  an  appalling  loss  in  the  way  of  physical 
sin,  costing  hundreds  of  millions  annually  in  cash  and 
untold  misery,  physical  pain,  mental  anguish  and 
heart-aches  as  the  retributive  wages  of  immoralities. 

The  Interstate  Commerce  Commission  report  for 
1910  showed  1000  killed  and  14,000  injured  by 
railroads,  and  7400  killed  and  80,000  injured  in  in- 
dustries. From  1890  to  1910  there  were  29,000 
fatal  accidents  in  mining  in  the  United  States. 

RECAPITULATION 

We  have  as  agencies  for  price-raising: 
Increased  supply  of  gold. 
Increased  consumption  per  capita. 
Lessened  cereal  production  per  capita. 
Trust  monopoly  and  control  of  prices. 
Earnings  on  over-capitalized  corporations. 
Tribute  to  parasitism. 

These  are  capable  of  manv  sub-divisions. 

There  are  other  sources  of  expense  which  are  not 


316  Markets    and   Rural   Economics 

new,  and  therefore  cannot  be  cited  as  the  cause  for 
increased  prices,  but  merely  add  to  the  load  the  race 
is  staggering  under  with  its  need  for  all  possible  use 
of  its  energies  for  the  production  of  necessities  and 
the  higher  development  of  civilization. 

To  tabulate  some  of  the  items  of  expense  which 
it  is  our  duty  to  eliminate  we  give  the  following  con- 
servative estimate : 

Dividends  on  over-capitalization.  .  .  .$1,500,000,000 
Unnecessary  expense  in  distribution.  1,500,000,000 

Excessive  interest  on  money 200,000,000 

Excessive  price  due  to  credit  buying.  .  .    200,000,000 


Total    $3,400,000,000 

To  extend  the  list,  including  items  springing  from 
personal  habit,  we  have  as  heavy  sums  the  following : 

Liquors $1,700,000,000 

Tobacco 800,000,000 

Coffee    66,000,000 

Tea 16,000,000 

Prostitution  estimated    300,000,000 


Total    $2,882,000,000 

It  matters  not  whether  the  cost  of  living  comes  high 
or  low,  all  the  above  could  be  lopped  off,  and  won- 
ders in  the  way  of  useful  expenditures  could  be  per- 
formed with  the  enormous  amount  of  capital  now 
wasted. 

We  should  not  lose  sight  of  the  fact  that,  although 
increased  gold  supply  is  the  one  world-wide  cause  of 
cheapening  the  powers  of  gold  and  enhancing  the 
price  of  commodities,  it  is  also  a  fact  that  a  very 
respectable  minority  of  commodities  do  not  show 
material  advances,  and  some  are  even  lower  today 
than  in  the  very  depressing  year  of  1896.  Nor  does 


Markets   and   Rural   Economics  317 

the  theory  that  trust-control  regulates  price  prove  in- 
fallible, when  we  find  that  the  greatest  relative  ad- 
vances have  come  to  products  of  nature,  as  distin- 
guished from  products  presumably  more  susceptible  of 
artificial  price  regulation.  Increasing  price  may  indi- 
cate inadequate  production  or  extravagant  consump- 
tion. Decreasing  price  may  mean  bountiful  produc- 
tion or  under-consumption.  Nevertheless,  the  only 
way  in  which  all  things  can  rise  in  price  simultaneous- 
ly, even  though  some  rise  faster  than  others,  is 
through  a  relative  increase  in  the  supply  of  that  which 
measures  all  price- — money. 

The  prices  of  commodities  of  international  trade 
are  set  on  the  international  market  basis,  with  tariff 
deflections  included.  We  have  $35.00  per  capita, 
but  when  we  sell  to  Japan  it  is  on  a  $5.41  per  capita 
basis.  England  has  $19.60  per  capita,  but  sells  and 
buys  millions  annually  in  India  on  a  yo-cent  per  cap- 
ita basis.  Argentina  has  $107.24  per  capita,  but 
sells  beef  to  Austria  with  $12.47  Per  capita.  The 
cost  of  distribution  and  the  power  to  consume  deter- 
mine the  trade  routes  of  world-commerce.  The  com- 
merce of  the  world  in  1913  amounted  to  $40,600,- 
000,000;  transported  by  55,802  sailing  ships,  47,714 
steamers,  and  by  trains  operating  on  625,000  miles 
of  railways. 

LESSON  XLVII 

Why  do  we  have  excessive  taxes  ? 

What  is  "pork  barrel"  legislation? 

For  what  purpose  does  a  greater  portion  of  national 
revenue  go  than  for  any  other  purpose  ? 

Why  has  increased  demand  been  for  manufactured 
articles  more  than  for  agricultural  products? 


318  Markets    and  Rural   Economics 

What  has  been  the  result? 

What  can  you  say  of  the  line  of  extravagance? 

Name  some  taxes  we  impose  on  ourselves,  which 
we  would  not  tolerate  were  they  imposed  by  the  gov- 
ernment. 

What  of  our  number  of  killed  and  injured? 

Name  half  a  dozen  causes  for  high  prices. 

Name  some  business  items  of  expense  which  we 
might  eliminate. 

Name  some  individual  expenses  which  we  might 
eliminate  and  be  the  better  off  thereby. 

What  is  the  one  agency  that  rules  in  general  price- 
making? 


CHAPTER  XXXII 

THEORIES  OF  REFORM 

We  will  consider  for  a  while  the  theories  advanced 
for  the  solution  of  our  social  problems. 

If  we  as  a  nation  are  too  indolent  or  ignorant  to 
do  some  good  hard  thinking,  we  will  have  to  pay  the 
penalty — and  a  severe  one. 

Two  main  attitudes  are  taken  by  social  thinkers  in 
regard  to  economic  tendencies  at  the  present  time. 
Some  think  that  the  basis  and  structure  of  society  will 
endure  indefinitely,  with  incident  changes  and  im- 
provements within  conservative  limits.  Prof.  Richard 
T.  Ely  and  Benjamin  Kidd  voice  this  doctrine  in 
their  standard  works. 

On  the  other  side  are  arranged  thinkers  who  look 
for  fundamental  changes  in  the  not  distant  future. 
Phis  side  has  different  schools  of  economic  doctrine, 
each  of  which  has  gained  no  little  prestige.  There 
is  the  individualism  of  Herbert  Spencer,  the  philo- 
sophical anarchism  of  Kropotkin,  the  single  tax  of 
Henry  George  and  the  socialism  of  Karl  Marx. 

It  is  but  voicing  the  unthinking  popular  impression 
to  say  that  the  present  order  of  society  will  endure 
for  aye.  But  thinkers  all  admit  that  the  cooperative 
tendencies,  under  the  direction  of  capital,  are  mak- 
ing for  a  metamorphosis  of  the  whole  economic  struc- 
ture. 

The  popular  conception  is  that  the  present  is  but 


320  Markets    and  Rural   Economics 

the  inevitable  and  natural  result  of  the  past,  and  the 
future  will  take  care  of  itself  without  worrying  over 
it. 

Competition  under  private  ownership  has  had  a 
full  test,  and  we  have  its  fruition  all  around  us.  It 
is  highly  satisfactory  to  the  lucky  few,  and  taken  for 
granted  as  a  matter  of  course  by  the  majority,  just 
as  was  slavery  in  the  years  gone  by. 

It  is  within  the  pervue  of  statesmanship  to  direct 
the  future  instead  of  allowing  the  laissez  faire  to  rule. 
It  is  the  pride  of  thinking  manhood  to  help  direct. 

The  following  is  from  uScience  History  of  the  Uni- 
verse/5 Vol.  10:  uProf.  Ely  conceives  society  as  fun- 
damentally competitive  and  based  on  private  owner- 
ship in  capital  yet  as  modified  by  increasing  coopera- 
tive tendencies.  It  is  interesting  to  contrast  his  views 
with  the  three  modern  theories  or  schools  which  aim 
to  subvert  the  very  foundations  of  the  present  social 
structure.  These  are,  broadly  speaking,  anarchism, 
the  single  tax,  and  socialism.  'Anarchism'  is  derived 
from  two  Greek  words  meaning  'without  govern- 
ment' ;  it  wants  to  get  rid  of  government  altogether. 
There  are  two  schools  of  anarchism — the  individual- 
ists and  the  communists.  The  first  would  preserve 
competition  and  private  property  in  capital,  the  sec- 
ond would  abolish  both. 

uThe  single  tax  would  preserve  competition  and 
private  property  in  the  instrument  of  production,  but 
would  abolish  private  property  in  land. 

"Socialism  would  inaugurate  an  era  of  universal 
cooperation,  in  which  land  and  the  instruments  of 
production  would  alike  be  owned  and  administered  by 
the  community  collectively. 

ANARCHISM 

"The  popular  hatred  and  misunderstanding  of  an- 


Markets   and  Rural   Economics  321 

archism  are  undoubtedly  due  to  the  acts  of  violence 
and  assassination  associated  with  it.  But  anarchy 
properly  understood  is  a  serious  philosophy  with  a 
serious  mission.  It  aims  to  eliminate  government  in 
the  interest  of  freedom;  it  would  carry  the  idea  of 
freedom  to  its  logical  ultimate  in  the  economic  field. 
Many  modern  thinkers  of  world  influence  have  im- 
bibed the  anarchist  spirit.  Herbert  Spencer,  at  the 
beginning  of  his  career,  taught  that  'government  is 
essentially  immoral,'  and  that  the  individual  has  'the 
right  to  ignore  the  state.'  In  his  later  writings  he 
modified  these  extreme  conclusions,  but  the  tendency 
of  his  argument  was  always  anti-governmental.  He 
makes  biology  teach  the  folly  of  state  intervention. 
He  would  put  a  veto  on  'all  public  action  which  ab- 
stracts from  some  men  part  of  the  advantages  which 
they  have  earned.'  In  harmony  with  this  attitude, 
Spencer  opposed  compulsory  education,  public  libra- 
ries, factory  legislation,  the  establishment  of  state 
telegraphy  and  many  other  similar  innovations.  The 
collectivist  trend  was  in  a  direction  exactly  opposite 
to  that  which  he  conceived  as  healthy  development. 
He  looked  upon  socialism  as  the  'coming  slavery.' 

"From  Spencer's  position  it  is  but  a  short  step  to 
anarchism  as  defined  by  its  advocates.  Kropotkin, 
the  ablest  living  exponent  of  the  communist  school  of 
anarchists,  asserts  that  the  coming  society  will  be 
based  on  common  ownership,  not  only  of  capital,  but 
also  of  the  materials  for  consumption.  'People  have 
tried  to  make  a  distinction  between  the  capital  that 
serves  for  the  production  of  goods,  and  that  which 
satisfies  the  wants  of  life,  and  have  said  that  ma- 
chines, factories,  raw  materials,  the  means  of  trans- 
portation and  the  land  are  destined  to  become  the 
property  of  the  community,  while  dwellings,  finished 
products,  clothing  and  provisions  will  remain  private 


322  Markets    and   Rural   Economics 

property.  This  distinction  is  erroneous  and  impracti- 
cable. The  house  that  shelters  us,  the  coal  and  gas 
that  we  burn,  the  nutriment  that  our  body  burns  up, 
the  clothing  that  covers  us,  the  book  from  which  we 
draw  instructions,  are  all  essential  to  our  existence, 
and  are  just  as  necessary  for  successful  production  and 
for  the  further  development  of  mankind  as  are  ma- 
chines, factories,  raw  materials  and  other  factors  of 
production.  With  private  property  in  the  former 
goods,  there  would  still  remain  inequality,  oppression, 
and  exploitation. 

uThe  individuals  of  this  free  society  will  be  asso- 
ciated in  communes.  They  will  take  upon  themselves 
duties  to  their  group,  which  on  its  part  will  engage 
to  do  certain  things  for  them.  The  communes  will 
also  link  and  intertwine,  but  always  of  their  own  free 
will.  In  short,  the  world  of  Kropotkin's  ideal  would 
be  a  federation  of  communes,  based  on  voluntary 
agreement,  without  governmental  coercion  of  any 
sort. 

uThere  is  nothing  in  anarchism  necessarily  conflict- 
ing with  the  'single  tax'  doctrines  propounded  by 
Henry  George  in  'Progress  and  Poverty,'  and  it  is 
worth  noting  that  here  again  Herbert  Spencer,  in 
his  earlier  days,  gave  countenance  to  theories  similar 
to  those  held  by  Henry  George."  (First  advocated 
by  Patric  Dove.  Parenthesis  ours.) 

SINGLE  TAX 

uThe  keynote  is  struck  in  'Progress  and  Poverty' 
in  the  following  passage :  'The  association  of  pov- 
erty with  progress  is  the  great  enigma  of  our  times. 
It  is  the  central  fact  from  which  spring  industrial, 
social,  and  political  difficulties  that  perplex  the  world, 
and  in  which  statesmanship,  philanthropy  and  educa- 
tion grapple  in  vain.'  Mr.  George  goes  on  to  argue: 


Markets   and   Rural   Economics  323 

'The  reason  why,  in  spite  of  the  increase  of  produc- 
tive power,  wages  constantly  tend  to  a  minimum  which 
will  give  but  a  bare  living,  is  that,  with  increase  of 
productive  power  rent  tends  to  even  greater  increase, 
thus  producing  a  constant  tendency  to  the  forcing 
down  of  wages/  He  states  his  remedy  as  follows : 
'There  is  but  one  way  to  remove  an  evil  and  that  is 
to  remove  the  cause.  Poverty  deepens  as  wealth  in- 
creases, and  wages  are  forced  down  while  produc- 
tive power  grows,  because  land,  which  is  the  source 
of  all  wealth  and  the  field  of  all  labor,  is  monopo- 
lized- To  extirpate  poverty,  to  make  wages  what 
justice  demands  they  should  be,  the  full  earnings  of 
the  laborer,  we  must  therefore  substitute  for  the  in- 
dividual ownership  of  land  a  common  ownership. 
Nothing  else  will  go  to  the  cause  of  the  evil,  in 
nothing  else  is  there  the  slightest  hope.  This,  then, 
is  the  remedy  for  the  unjust  and  unequal  distribution 
of  wealth  apparent  in  modern  civilization  and  for  all 
the  evils  which  flow  from  it.  We  must  make  land 
common  property.' 

uThe  method  by  which  Mr.  George  proposes  to 
make  land  common  property  is  the  single  tax.  'I  do 
not  propose,'  he  says,  'either  to  purchase  or  confis- 
cate property  in  land.  The  first  would  be  unjust  and 
the  second  needless.  Let  the  individuals  who  now 
own  it  still  retain,  if  they  want  to,  possession  of  what 
they  are  pleased  to  call  their  land.  Let  them  buy 
and  sell  and  bequest  and  devise  it.  It  is  not  necessary 
to  confiscate  land,  it  is  only  necessary  to  confiscate 
rent.  We  already  take  rent  in  taxation.  We  have 
only  to  make  some  changes  in  our  mode  of  taxation 
to  take  it  all.  In  this  way  the  state  may  become  the 
universal  landlord  without  calling  herself  so,  and 
without  assuming  a  single  new  function.' 


324  Markets    and   Rural   Economics 

"Henry  George's  revolutionary  proposal  found  sup- 
porters all  over  the  world.  Tolstoy  was  one  of  his 
converts.  While  the  'single  tax'  as  George  advo- 
cated it  has  not  been  adopted  by  any  country,  its 
underlying  principles  have  influenced  profoundly  the 
policy  of  nations. 

SOCIALISM 

"The  third  system  of  social  theory  proposing  fun- 
damental changes  is  socialism,  and  Karl  Marx  was 
its  first  great  exponent.  Before  his  time  socialistic 
doctrines  were  Utopian  and  nebulous.  He  coordi- 
nated them  into  a  science.  His  work,  'Das  Kapital,' 
has  become  one  of  the  landmarks  of  economic 
thought.  The  two  great  discoveries  of  Marx  were 
'surplus  value'  and  'economic  determinism.'  By  the 
first  he  meant  the  'surplus'  which  the  wageworker 
creates,  but  for  which  he  receives  no  return.  Most 
social  students  acknowledge  that  the  workers  have 
never,  in  any  age,  received  the  full  value  of  their 
product.  Slavery  and  serfdom  were  alike  based  on 
the  spoliation  of  the  worker.  Henry  George  traced 
his  spoliation  to  the  private  ownership  of  land.  Marx 
took  the  position  that  since  the  inauguration  of  the 
capitalistic  era,  capital,  in  the  largest  sense,  is  the 
instrument  of  spoliation. 

"Marx's  second  discovery,  sometimes  called  the 
'materialist  conception  of  history,'  was  based  on  his 
recognition  of  the  overwhelming  influence  exerted  by 
economic  motives  on  human  progress.  No  other  econ- 
omist or  sociologist  has  sufficiently  recognized  this 
influence. 

"Socialistic  ideas  have  found  expression  through 
a  multitude  of  other  thinkers.  There  are  several 


Markets   and   Rural   Economics  325 

groups  of  socialists,  divided  by  differences  of  opinion 
in  regard  to  theories  and  methods.  But  all  are  united 
in  the  belief  that  the  present  competitive  order  of 
society  based  on  private  ownership  of  capital  is  about 
to  be  superseded  in  the  process  of  evolution  by  a  co- 
operative commonwealth,  based  on  public  ownership 
of  land  and  the  instruments  of  production  and  dis- 
tribution." 

SYNDICALISM 

The  word  "Syndicalism"  is  from  "syndicat,"  the 
French  term  for  a  trade  union.  It  is  the  term  of  the 
revolutionary  economists,  who  contend  that  social  rev- 
olution must  come  through  the  direct  action  of  the 
labor  unions.  The  Socialists  look  to  the  abolition  of 
capitalism  by  political  action;  syndicalists  seek  to 
bring  it  about  by  taking  over  the  industries — the 
workers  in  each  trade  assuming  ownership  and  con- 
trol of  the  material  of  life  in  the  trade. 

Syndicalism  thrives  in  Italy,  not  in  the  overcrowded 
cities  among  clans  of  the  outlaw  type,  but  among  the 
farmers.  200,000  acres  have  passed  into  the  hands 
of  farm  laborers  organized  into  agricultural  syndi- 
cates. It  is  also  taking  hold  among  the  industrial 
laborers.  The  Industrial  Union  of  Italian  Railway- 
men  has  as  its  motto:  "The  Railways  for  the  Rail- 
waymen." 

In  November,  1910,  the  first  conference  of  English 
Syndicalists  showed  that  60,000  workers  were  repre- 
sented. These  members  have  vastly  increased  since 
that  date. 

It  was  at  the  Lawrence  strike  that  Syndicalism  first 
appeared  in  America,  because  of  the  fact  that  some 
of  the  strike  leaders  were  imbued  with  the  radical 
philosophy. 


326  Markets    and   Rural   Economics 

Craft  Unionism  received  great  impetus  in  the 
eighties  under  the  Knights  of  Labor,  and  extended  to 
the  development  of  the  American  Federation  of 
Labor.  Class-conscious  vocationalism  has  been  gain- 
ing ground  under  the  influence  of  economic  condi- 
tions. Finding  support  among  socialist  workingmen, 
the  idea  of  Industrial  Unionism  was  combined  with 
the  Socialist  conception,  and  a  theory  resembling 
French  Syndicalism  was  the  result.  In  1905  the  In- 
ternational Workers  of  the  World  made  this  theory 
the  basis  of  their  program. 

The  Syndicalists  extend  the  meaning  of  labor  to 
include  all  who  do  useful  wrork  for  society;  their  idea 
is  to  transform  society  into  a  federation  of  self-gov- 
erning producing  groups,  working  together  for  the 
benefit  of  all,  with  instruments  belonging  to  society 
as  a  whole  and  under  the  supreme  control  of  the 
community. 

Proposals  for  the  political  and  industrial  reorgani- 
zation of  society  are  many,  and  each  has  its  ardent 
advocates  and  defenders.  Barring  such  mild  modi- 
fications as  are  from  time  to  time  proposed  by  the 
leading  political  parties,  we  have : 

Anarchism. — Abolition  of  government;  substitution 
of  individual  independence  or  the  voluntary  commune. 

Communism. — Abolition  of  private  ownership  of 
wealth;  substitution  of  collective  ownership  of  both 
social  and  private  wealth. 

Socialism. — The  socializing  of  all  capital  used  in 
the  production  of  wealth;  the  continuation  of  private 
ownership  of  certain  private  property;  democratic 
form  of  government,  and  the  extension  of  its  func- 
tions to  the  operating  and  owning  of  all  industries, 
the  same  as  it  does  the  post-office. 

Syndicalism. — The  vocational  organization  of  so- 


Markets   and   Rural   Economics  327 

ciety,  and  those  in  each  vocation  owning  all  the  ma- 
terial of  that  vocation  as  common  property. 

Government  ownership  of  public  utilities. — This  is 
the  first  step  toward  socialism.  We  have  already 
socialized  the  money  function,  the  army  and  navy,  the 
public  schools,  public  roads,  public  parks,  the  post- 
office,  etc.,  and  to  extend  this  principle  to  all  depart- 
ments of  activity  would  be  to  socialize  society.  The 
arbitrary  governmental  control  of  corporations  is  be- 
ing tested  as  a  substitute  for  social  assumption  of 
ownership. 

Single  Tax. — This  is  a  proposal  to  exempt  all  per- 
sonal property  and  commercial  business  from  taxes 
and  place  all  taxes  on  land  values,  take  the  rent  and 
allow  the  individual  to  retain  ownership  if  he  chooses. 

Voluntary  Cooperation. — This  is  urged  as  the  only 
sound  economic  principle  for  the  operation  of  the  com- 
plex activities  of  modern  civilized  society.  Its  advo- 
cates claim  that  it  avoids  the  coercive  tyranny  of  a 
governmental  bureauocracy,  the  "pull'  and  graft  in- 
cident to  government  operation,  the  spoiling  of  the 
uspirit  of  the  shop"  manifested  under  individual  in- 
itiative and  control,  does  not  assume  responsibility 
for  the  trifling  but  leaves  him  to  his  own  rewards 
by  the  process  of  elimination,  and  yet  withal  obtains 
the  advantages  of  collective  activity  and  the  economic 
savings  sought  under  Socialism. 

LESSON  XLVIII 

What  is  a  school  of  thought? 
What  is  an  economic  tendency? 
What  two  main  branches  of  economic  thought  are 
in  the  field  of  economic  thought? 

What  two  schools  of  anarchy  are  there  ? 


328  Markets    and  Rural   Economics 

Define  the  philosophy  of  Herbert  Spencer. 
Define  the  Anarchy  of  Kropotkin. 
Define  single  tax  as  promulgated  by  Henry  George. 
What  is  the  ultimate  aim  of  single  tax? 
Define  Socialism. 

What  is  the  philosophy  of  Socialism  ? 
What  is  the  ultimate  aim  of  Socialism? 
What  is  Syndicalism? 

What  is  the   difference  between   Syndicalism   and 
government  ownership  of  public  utilities? 
What  is  Communism? 
What  is  Individualism? 
What  is  Republicanism? 
What  is  Democracy? 


CHAPTER  XXXIII 

HOME  OWNERSHIP 

Home  ownership  among  farmers  is  impossible  if 
individuals  and  corporations  are  allowed  to  monopo- 
lize all  the  valuable  lands. 

Alien  ownership  should  be  prohibited. 

There  should  be  a  system  of  limitation  to  land- 
holding  by  individuals  and  corporations. 

In  Denmark  89  per  cent,  are  home-owners. 

In  Germany  87  per  cent,  of  the  land  is  tilled  by 
owners. 

In  Great  Britain  87  per  cent,  is  tilled  by  tenants. 

Fifty-four  foreign  corporations  and  individuals  own 
an  area  in  the  United  States  exceeding  the  combined 
areas  of  the  States  of  New  Hampshire,  Vermont, 
Massachusetts,  Connecticut,  Rhode  Island,  New  Jer- 
sey and  Delaware. 

The  holdings  of  sixty-three  owners,  individuals  and 
corporations  in  the  United  States  exceed  the  com- 
bined areas  of  the  German  Empire,  Denmark,  Bel- 
gium, Holland  and  Switzerland. 

The  same  capitalists  that  own  the  great  cotton  mills 
of  Europe  and  America  are  buying  the  finest  cotton 
lands  of  the  South,  and  having  them  worked  by  ne- 
groes and  cheap,  degraded  foreign  labor.  And  these 
captains  of  industry  are  the  ones  that  are  making 
such  a  stir  about  the  need  of  immigration  in  the  South. 
Those  who  want  cheap  labor  to  work  in  competition 


33°  Markets    and   Rural   Economics 

with  the  self-respecting  American  white  labor  are  the 
ones  behind  the  various  big  conventions  that  are  be- 
ing held  at  various  points  throughout  the  country  to 
encourage  immigration.  They  already  own  six  mil- 
lion acres. 

There  has  been  created,  therefore,  not  only  the 
framework  of  an  enormous  timber  monopoly,  but  also 
an  equally  sinister  land  concentration  in  extensive  sec- 
tions. This  involves  also  a  great  wealth  in  minerals. 
The  Southern  Pacific  has  4,381,000  acres  in  northern 
California  and  western  Oregon,  and,  with  the  Union 
Pacific,  which  controls  it,  millions  of  acres  elsewhere. 
(The  Government,  however,  is  now  suing  to  annul 
title  to  the  Southern  Pacific  lands  in  Oregon  for  non- 
compliance  with  the  terms  of  the  original  grants.) 
The  Northern  Pacific  owns  3,017,000  acres  of  tim- 
ber land  and  millions  more  of  untimbered  land.  The 
Weyerhauser  Timber  Company  owns  1,945,000 
acres.  In  Florida,  five  holders  have  4,600,000  acres, 
and  the  187  largest  timber-holders  have  over  15,800,- 
ooo  acres,  nearly  one-half  the  land  area  of  the  State. 
In  the  whole  investigation  area  the  1,802  largest 
holders  of  timber  have,  together,  88,979,000  acres 
(not  including  Northern  Pacific  and  Southern  Pacific 
lands  in  untimbered  regions)  ;  which  would  make  an 
average  holding  of  49,000  acres,  or  77  square  miles. 

Finally,  to  timber  concentration  and  to  land  con- 
centration is  added  in  our  most  important  timber  sec- 
tions, a  closely  connected  railroad  domination.  The 
formidable  possibilities  of  this  combination  in  the 
Pacific-Northwest  and  elsewhere  are  of  the  gravest 
public  importance. 

Ancient  Italy  was  a  country  of  small  farmers.  The 
urich  men  and  money  lenders/'  as  Plutarch  calls 
them,  made  loans  to  the  agricultural  people  at  ruin- 


Markets   and   Rural   Economics  331 

ous  rates  of  interest,  secured  by  mortgages  on  their 
little  farms.  In  time,  these  mortgages  were  closed 
and  the  owners  ejected.  The  lands  became  the  prop- 
erty of  the  great  landlords,  who  cultivated  them  with 
white  slave  labor,  the  captives  sent  home  by  the 
Roman  armies  from  foreign  countries.  These  cap- 
tive slaves,  being  the  property  of  the  government, 
were  sold  to  uthe  rich  men  and  money  lenders,"  who 
used  them  to  dispossess  the  farmers  whose  sons  were 
fighting  the  battles  of  Rome.  This  condition  of 
things  naturally  paralyzed  the  patriotism  of  the  young 
soldiers,  whose  parents  were  driven  from  their  homes, 
and  did  more  than  any  other  one  thing  to  cut  the 
foundations  from  under  the  Roman  Republic.  In 
one  of  the  great  speeches  made  by  Tiberius  Grach- 
chus,  to  the  people,  he  said:  "You  are  made  to  be- 
lieve that  you  are  fighting  for  your  altars  and  your 
homes,  when,  really,  you  have  no  altars  and  no 
homes. "  Tiberius  was  murdered  for  his  boldness  by 
the  hirelings  of  the  landlords,  and  so  was  Caius,  his 
brother,  who  followed  in  his  footsteps. 

The  Latin  writer,  Pliny,  observed  IQOO  years  ago, 
that  large  estates  had  been  the  ruin  of  Italy  and  were 
then  ruining  the  provinces,  and  nineteen  centuries 
since  Pliny  have  only  added  constantly  increasing 
strength  to  his  doctrine. 

Two-thirds  of  the  lands  of  United  Kingdom  is  held 
by  10,911  owners.  One-half  is  owned  by  ^,408  pro- 
prietors, and  the  rest  is  owned  by  1,162,722  owners, 
averaging  17  acres  each.  Twelve  land-owners  have 
1,068,833  acres  out  of  the  total  of  72,117,766  acres. 

A  few  decades  ago  statistics  showed  that  $2$ 
peers  owned  one-fifth  of  all  the  land  of  the  country. 
The  average  Duke  owned  142,264  acres;  the  aver- 
age Marquis  47,500  acres;  the  average  Earl  30,217 


33 2  Markets    and  Rural   Economics 

acres;  and  the  average  Baron,  14,152  acres.  Today 
four-fifths  of  the  land  of  England  is  owned  by  less 
than  ten  thousand  people,  who  form  a  huge  land  mo- 
nopoly, with  the  holdings  of  the  great  peers  as  the 
centre  and  the  point  of  resistance. 

This  monopoly  of  the  land  has  been  an  unmiti- 
gated curse  to  England.  Year  by  year  the  popula- 
tion of  the  rural  districts  falls.  The  young  country- 
men, with  no  chance  of  acquiring  land,  with  no  chance 
of  earning  a  decent  living  or  even  of  maintaining  in- 
dependence, flock  to  the  cities  in  shoals.  Agriculture 
is  deserted.  The  crops  lessen  decade  by  decade,  while 
more  and  more  the  country  becomes  dependent  upon 
foreign  food.  There  are  much  less  than  half  as  many 
agricultural  laborers  in  the  United  Kingdom  today  as 
there  were  sixty  years  ago.  The  holdings  of  the 
Lords  and  of  their  wealthy  landlord  allies  surround 
the  towns  and  prevent  their  growth,  and  individual 
Peers  own  dozens  of  parishes,  including  every  build- 
ing lot,  and  every  house. 

The  Marquis  of  Anglesey  is  the  owner  of  about 
40,000  acres  of  land;  80  people  own  one-half  of 
Scotland  and  710  people  one-fourth  of  England  and 
Wales.  "According  to  the  returns  of  1872,  2,250 
persons  owned  half  the  enclosed  land  of  England  and 
Wales,  while  nine-tenths  of  Scotland  was  owned  by 
1,700  people  and  two-thirds  of  Ireland  by  1,942  peo- 
ple." And  the  situation  seems  not  to  have  changed 
materially  since  that  time,  except  in  Ireland.  In 
Great  Britain,  in  1910,  "28, 238, 44  <;  acres  under 
crops  and  erass  were  occupied  by  tenants  and  3,907,- 
48  <  acres  by  owners" — over  seven-eighths  by  tenants 
and  less  than  one-eighth  by  owners. 

The  home-owning  farmers  of  the  continent  are  out- 
stripping the  English  farmer. 


Markets   and   Rural   Economics  333 

England  realizes  this,  and  English  landlordism  is 
doomed.  The  only  question  is  as  to  how  it  shall  be 
executed — how  it  shall  meet  a  fate  it  has  long  and 
richly  merited.  Richard  Cobden  said  a  long  time 
ago:  "The  condition  of  the  English  peasantry  has 
no  parallel  on  the  face  of  the  earth.  There  is  no 
other  country  in  the  world  where  you  will  not  find 
men  holding  the  plow  and  turning  the  furrow  on  their 
own  free-holdings. " 

Cobden's  greatest  service  to  England,  of  course, 
was  securing  the  repeal  of  the  taxes  on  food,  but  he 
said  before  he  died,  "You  who  shall  liberate  the  land 
will  do  more  for  your  country  than  we  have  done  in 
the  liberation  of  its  commerce."  Other  issues,  how- 
ever, have  engaged  the  public  attention  since  Cobden's 
time,  and  the  great  estates  have  continued  the  stum- 
bling block  in  the  way  of  English  progress. 

Six  or  seven  centuries  ago  England's  population 
was  a  mere  fraction  of  its  present  volume.  There  was 
plenty  of  land  for  everybody,  and  acreage  possessed 
no  great  value.  In  the  Middle  Ages  money  was 
scarce,  and,  therefore,  endowed  with  far  greater  pur- 
chasing power  than  today.  It  was  during  these 
periods  that  sundry  British  families  acquired  vast 
tracts  of  land  by  purchase,  as  a  reward  for  service 
rendered  their  monarchs,  or  in  recognition  of  military 
valor. 

David  Lloyd-George  became  Chancellor  of  the  Ex- 
chequer, and  in  1912  began  the  work  of  reconstruct- 
ing the  English  system  of  taxation.  The  effrontery, 
the  ridiculous,  cold-blooded  audacity  of  taxing  blocks 
of  the  highest-priced  business  shops  in  London  upon 
their  value  when  the  land  was  a  pasture  insulted  his 
intelligence. 

At  last,  the  rich  man  must  contribute  his  just  share 


334  Markets    and  Rural   Economics 

to  the  support  of  the  nation.  He  must  value  his  land 
at  its  true  worth. 

Lloyd-George  is  England's  man  of  the  hour — idol 
to  the  people — pest  to  the  idle.  He  symbolizes  the 
world's  new  era.  The  day  of  the  privileged  few  is 
past. 

The  feudalism  of  the  Middle  Ages  was  founded 
on  land  monopoly.  The  modern  feudalism  of  capital 
is  not  confined  to  nor  dependent  on  land  monopoly, 
but  it  is  a  powerful  auxiliary  to  it  and  getting  to  be 
more  so  every  day. 

We  are  sitting  still  and  allowing  this  process  of 
monopolization  of  land  to  go  right  on  unmolested, 
with  too  little  interest  to  take  cognizance  of  it,  much 
less  to  try  to  stop  it. 

Every  State  Legislature  and  each  Congress  should 
be  besieged  by  a  committee  of  farmers  asking  for  laws 
to  prevent  monopolization. 

Past  experience  has  been  that  it  takes  a  war  and  a 
state  of  desperation  to  arouse  the  people  to  demand 
the  law  that  will  abolish  unlimited  ownership  of  the 
earth.  It  took  the  armies  of  Napoleon  to  bring  Ger- 
many to  her  senses.  After  the  peace  of  Tilsit  in  1 807 
the  great  feudal  estates  were  divided  into  small  es- 
tates, and  parceled  out  among  the  peasant  farmers 
on  long  term  loans,  at  a  low  rate  of  interest.  It  took 
the  horrible  reign  of  terror  to  break  up  landlord  tyr- 
anny in  France.  There  is  an  apparent  exception  in 
the  case  of  Ireland.  But  it  is  a  case  of  economic  co- 
ercion instead  of  being  forced  at  the  point  of  the 
bayonet.  By  parliamentary  enactment  England  has 
virtually  dispossessed  the  landlords  of  Ireland  and 
created  a  fund  of  $660,000,000,  since  increased  to 
near  $2,000,000,000,  by  means  of  which  the  Irish 
farmers  may  purchase  on  easy  terms  their  own  farms. 

Four  hundred  million  dollars'  worth  have  thus  been 


Markets    and   Rural   Economics  335 

divided  and  restored  to  the  Irish  farmers.  This  en- 
actment was  wrung  from  Parliament  by  the  desertion 
of  Ireland  by  her  people.  Since  1846  Ireland  has 
lost  more  than  half  her  population.  In  the  last  sixty 
years  Great  Britain  has  lost  by  emigration  more  of 
her  people  than  the  present  population  of  Scotland 
and  Ireland  combined.  We  are  losing  100,000  a 
year  of  our  people  by  emigration  to  Canada.  The 
most  of  them  are  sturdy  American  farmers;  and  the 
main  incentive  is  land. 

In  Ireland  absentee  landlordism  was  in  vogue  so 
long  that  it  undermined  thrift,  energy  and  initiative. 
It  was  mainly  responsible  for  the  ruinous  emigration 
which  drained  the  country  of  its  best  blood.  In  1841 
the  island  had  a  population  of  8,000,000,  and  in  1912 
it  had  only  4,000,000.  Since  the  great  famine  of 
1 846-^47,  when  the  potato  crop  failed,  a  vast  tide  of 
emigration  flowed  to  America  and  to  other  parts  of 
the  world. 

Agricultural  and  rural  life  in  Ireland  has  been 
much  improved  by  the  system  of  land  purchase  intro- 
duced under  the  Act  of  Parliament,  in  1885,  and 
by  supplemental  acts,  enabling  tenants  to  borrow7 
money  on  Government  credit  for  the  purchase  of 
farms.  The  installment  payments  of  these  loans  are 
spread  over  50  or  60  years,  on  such  terms  that  the 
annual  amount  required  to  cover  both  interest  and 
sinking  fund  is  less  than  the  rent  formerly  paid. 

Under  these  acts  the  Government  has  already  ad- 
vanced more  than  $486,650,000,  and  in  the  course 
of  another  30  years  a  large  part  of  the  Irish  farmers 
should  own  their  farms  free  from  any  charge.  In 
twenty-five  years  Ireland  has  changed  from  a  tenant- 
farmer  country  to  a  country  of  home-owning  farmers. 
The  new  (1912)  statistics  show  350,000  holdings 
bought,  to  250,000  tenanted. 


336  Markets    and   Rural   Economics 

Not  only  was  it  provided  by  law  some  years  ago 
that  the  tenant  might  acquire  land  at  a  price  fixed 
by  the  local  authorities  as  correct,  and  one  hundred 
million  pounds  advanced  or  loaned  to  tenants  wish- 
ing to  buy,  but  the  British  Government  appropriated 
$60,000,000  outright  to  cover  the  difference^  between 
what  lands  might  appear  to  be  worth  and  what  ten- 
ants could  afford  to  pay. 

There  is  a  provision  that  the  Government  may 
advance  the  full  purchase  on  condition  that  they  re- 
pay 31/4%  a  Year  f°r  sixty-eight  and  one-half  years, 
2%  Per  cent,  of  this  3^  being  used  to  cover  interest, 
and  the  balance  as  a  sinking  fund  to  pay  off  the  in- 
vestment itself.  At  the  end  of  the  sixty-eight  years 
they  or  their  heirs  will  own  the  land  outright,  with- 
out paying  more  perhaps  than  they  would  otherwise 
have  had  to  pay  for  rent  alone. 

These  things  have  been  done  for  the  homeless  in 
a  monarchial  country.  I  wonder  if  any  one  will 
claim  that  we  need  no  check  on  landlordism  in  this 
country?  Or,  are  we  ready  to  accept  a  condition  of 
tenantry  and  peasantry  in  this  country  as  inevitable? 

In  1900,  35.3  per  cent,  of  the  farms  of  the  United 
States  were  tenant  farms. 

In  1910  the  percentage  had  risen  to  37.1  per  cent. 

Take  Tennessee,  Kentucky,  Alabama,  Mississippi, 
Louisiana,  Arkansas,  Texas,  and  Oklahoma  in  a 
group  and  look  what  we  find: 

In  30  years  tenant  farms  have  increased  from  36.2 
to  57*7  per  cent. 

And  the  percentage  runs  highest  in  white  sections, 
such  as  the  eastern  parts  of  Oklahoma  and  the  black 
lands  of  Texas.  In  Arkansas  there  were,  in  1880, 
the  goodly  number  of  29,188  tenant  farms,  but  in 
1910  there  were  107,226  tenant  farms — just  half 


Markets    and   Rural   Economics  337 

the  total  number.  During  the  same  period  the  num- 
ber of  tenant  farms  in  Louisiana  increased  from  35.2 
t°  55-3  Per  cent.  During  the  same  period  tenant 
farms  increased  in  Texas  from  37.6  per  cent,  on  5,- 
468,  to  53  per  cent,  on  219,575  farms.  From  1900 
to  1910  Texas  added  to  her  population  44,115  ten- 
ants and  20,354  farm-owners.  During  the  same  dec- 
ade Oklahoma  tenants  increased  from  47,250  (or 
43.8  percent.)  to  104,137  (or  54.8  percent.). 

How  can  market  conditions  be  improved  without 
concert  of  action?  How  can  concert  of  action  be 
secured  with  a  shifting  tenantry?  We  need  a  revo- 
lution in  our  rural  credits,  and  in  our  system  of  land 
taxation.  Suppose  you  swap  places  with  landlord  and 
tenant,  what  would  result?  The  renter  would  be 
doing  just  what  the  landlord  is  doing,  and  the  land- 
lord just  what  the  renter  is  doing.  Neither  is  any 
better  or  worse  than  the  other  by  nature.  A  certain 
percentage  of  the  renters  may  be  less  enterprising  or 
thrifty  than  the  average  landowner,  but  this  does  not 
change  the  problem.  Land  is  high ;  measured  by  the 
purchasing  power  of  wages  on  the  farm,  it  is  out  of 
reach. 

Bonanza  farming  is  coming  more  and  more  into 
use.  The  advantages  gained  by  the  operation  of  a 
large  farm  under  skilled  management  and  ample  cap- 
ital are  apparent.  Better  machinery,  better  stock, 
labor  secured  on  the  lowest  market,  bulk  purchase 
and  bulk  sale,  and  expert  knowledge  in  directing, 
make  the  bonanza  farm  a  winner  as  compared  with 
the  small  farm,  poorly  equipped  and  operated. 
Swamps  are  drained  by  corporations  and  thousands 
of  acres  brought  under  cultivation  which  otherwise 
could  not  be  utilized.  Corporations  carry  out  irriga- 
tion projects  which  could  not  otherwise  be  handled. 


33  S  Markets    and  Rural   Economics 

/ 

Conveniences  are  provided  on  the  bonanza  farm  that 
the  average  farm  cannot  afford. 

On  the  other  hand  the  fact  that  labor  is  secured 
on  the  market  of  the  lowest  bidder  results  in  segre- 
gating those  types  least  fitted  for  a  progressive,  en- 
lightened citizenship.  Society  drifts  back  on  the  feud- 
alistic  basis,  and  the  ideal  home,  which  is  the  anchor 
of  the  Republic  and  the  hope  of  the  world,  becomes 
a  rare  exception  and  not  the  rule. 

Possibly  the  greatest  events  in  the  world's  history 
are  immigrations  in  search  of  land  and  opportuni- 
ties. The  emigration  of  the  Jews  from  Egypt  was 
in  search  of  land.  The  emigration  from  Asia  to 
Greece  and  Rome  was  in  search  of  land.  The  emi- 
gration during  the  Dark  Ages — 1000  years  when  the 
world  slept — was  from  Northern  Europe  to  Britain, 
and  was  perhaps  the  most  important  event  of  those 
ages;  and  the  emigration  of  the  northwestern  Euro- 
peans to  the  Americas,  Australia,  and  South  Africa 
was  of  course  the  most  important  event  within  the 
meaning  of  modern  history,  and  it  seems  we  have 
about  settled  up  all  the  lands  of  the  world,  and  civ- 
ilization has  got  to  make  a  stand  where  it  is. 

Every  condition  is  a  prophecy  of  something  that  is 
to  follow.  It  can  not  be  otherwise,  and  it  is  within  the 
purview  of  statesmanship  to  interpret  the  effect  of 
conditions. 

Coming  direct  to  the  civic  and  moral  effects  of 
indiscriminate  immigration  and  mixing  of  races,  I 
wish  to  say  that  we  have  learned  that  the  buying  of 
labor  in  the  cheapest  market  is  a  poor  device  for 
which  civilization  pays  in  the  maintenance  of  under- 
bred, under-nourished,  and  under-educated  children, 
and  the  expense  of  combating  crime  and  diseases 
that  these  cheap  human  products  ignorantly  spread 


Markets   and   Rural   Economics  339 

throughout  society  is  the  poorest  investment  possible. 

Prof.  John  R.  Commons,  of  the  University  ot 
Wisconsin,  and  with  the  United  States  Industrial 
Commission  during  its  recent  extensive  investigations, 
says,  in  his  book,  uRaces  of  Immigrants"  : 

"It  is  in  the  large  foreign  cities  of  the  North  that 
popular  government,  as  your  Teutonic  forefathers 
conceived  it,  has  been  displaced  by  the  despotic  boss, 
and  a  profound  distrust  of  democracy  has  taken  hold 
of  the  educated  and  property-holding  classes  who 
fashion  public  opinion." 

In  the  language  of  Hugh  Chalmers : 

UA  great  many  people  seem  to  think  that  popu- 
lation is  everything  in  a  city.  I  venture  to  say  that 
there  is  not  a  city  in  the  United  States  but  what  would 
be  better  off  without  ten  per  cent,  of  its  population. 
Numbers  do  not  make  quality." 

During  12  years  there  came  to  the  United  States 
enough  Italians  to  people  five  cities  like  Rome; 
enough  Greeks  to  people  two  cities  like  Athens;  more 
Poles  than  there  are  in  Warsaw ;  more  Scandinavians 
than  there  are  in  Stockholm;  more  Magyars  than  in 
Kronstadt,  and  more  Finns  than  in  Viborg. 

Italy's  contribution  to  American  immigration,  of 
nearly  two  and  a  quarter  million  souls,  stands  out  as 
a  marked  feature  of  immigration  history.  Nearly 
nine-tenths  of  these  came  from  southern  Italy.  The 
people  of  northern  and  southern  Italy  speak  such 
varying  dialects  that  they  scarcely  can  converse  with 
one  another.  In  some  parts  of  southern  Italy  more 
than  three-fourths  of  the  people  are  illiterates.  Rosco, 
the  Italian  statistician,  admits  that  Italy  leads  all  the 
nations  in  the  number  of  crimes  against  the  person. 
Niceforo,  the  Italian  sociologist,  declares  that  the 
inhabitants  of  northern  Italy  possess  all  the  qualifi- 


34°  Markets    and  Rural   Economics 

cations  for  good  citizenship,  but  that  the  south  Italian 
is  an  individualist,  having  little  adaptability  to  highly 
organized  society. 

A  condition  once  existed  in  Rome  which  was  a 
prophecy  of  her  decline  and  fall — and  the  wreck  of 
civilization,  followed  by  a  thousand  years  which  his- 
torians now  designate  as  the  uDark  Ages." 

The  conquering  armies  of  Rome  paved  the  way 
for  slaves  to  be  sent  back  to  Rome  to  till  the  lands, 
which  led  to  the  eviction  of  the  farmer  classes.  This 
drove  the  independent  farmer  to  vassalage,  from  vas- 
salage to  vagrancy,  from  vagrancy  to  beggarism,  and 
from  beggarism  to  desperation.  When  he  was 
crushed  the  monied  oligarchy  stood  absolutely  su- 
preme. The  shrewd  Roman  capitalists  viewed  his 
interests  just  as  those  modern  captains  of  industry 
who  think  of  nothing  but  gain  view  the  labor  prob- 
lem today.  It  was  plain  to  the  Roman  employer  that 
the  labor  of  eastern  slaves  made  bigger  profits  to 
him  than  that  of  his  original  vassals.  And  on  that 
basis  extensive  traffic  in  Asiatic  slaves  began.  Still 
the  slight  cost  of  these  throngs  of  misery  did  not 
appease  his  greed  entirely.  Paid  militia  were  sent 
to  invade  Macedonia  and  the  East,  bringing  back, 
besides  the  material  treasures  of  conquest,  hordes  of 
these  victims.  And  with  this  wide  adoption  of  Asiatic 
slaves,  competition  at  Rome  reached  a  point  of  dan- 
gerous enormity.  No  Roman  economist  would  em- 
ploy a  fellow-countryman  when  his  labor  could  not 
maintain  a  parity  of  profit  with  that  of  his  numerous 
and  newly-acquired  slaves.  Since  employment  could 
not  be  obtained,  hundreds  were  driven  to  crime — 
the  record  of  the  idle  poor  of  all  countries.  The 
arenas  of  the  amphitheaters  were  filled  with  crowds 
of  desperate  gladiators,  and  the  rabble  was  constantly 


Markets   and  Rural  Economics  341 

swelled  by  it  at  the  capital  city — and  were  used  by 
the  demagogues  to  further  their  interests. 

A  condition  once  existed  in  France  that  was  a 
prophecy  of  the  reign  of  terror,  when  France  mur- 
dered her  own  citizens  and  disturbed  the  peace  of 
the  world,  but  its  statesmen  did  not  see  it.  The  in- 
exorable law  of  cause  and  effect  will  have  its  way.  We 
do  not  escape  its  penalties  by  ignoring  it,  either  as 
individuals  or  as  nations.  France  paid  the  debt  to 
the  last,  full  measure.  Baptized  in  fire  and  blood, 
she  arose,  after  many  a  struggle  and  groan,  a  republic. 
This  would  have  been  impossible  had  her  citizenship 
been  mongrelized  as  had  been  the  citizenship  of 
Rome. 

A  condition  once  existed  in  England  that  was  a 
prophecy  of  Cromwell  marching  into  Parliament  fol- 
lowed bv  his  soldiers  and  thundering  to  that  august 
body:  "There  is  not  a  crime  in  the  calendar  of  which 
you  are  not  guilty — get  out!"  and  Parliament  was 
dissolved. 

Later  on  the  laws  passed  by  Parliament,  at  the 
request  of  the  English  manufacturers  and  merchants, 
were  a  prophecy  of  Cornwallis  handing  his  sword 
to  Washington  at  Yorktown,  but  they  did  not  see  it. 
England  thus  threw  away  a  pearl  richer  than  all  her 
tribe  because  of  the  short-sighted  statesmanship  of 
her  lawmakers. 

It  was  put  in  our  national  Constitution  that  the 
slave  trade  should  not  be  abolished  before  1808.  As 
a  result  every  slaveship  that  was  fanned  across  the 
Atlantic  Ocean  was  a  prophecy  of  Sherman's  march 
to  the  sea,  four  years  of  civil  strife,  millions  of  wealth 
destroyed,  and  thousands  of  as  brave  soldiers  as  ever 
answered  the  call  to  arms  were  sacrificed;  but  the 
people  of  that  day  did  not  realize  it  and  the  penalty 
has  been  paid. 


342  Markets    and   Rural   Economics 

In  the  question  under  consideration  we  are  faced 
with  a  problem  calling  for  the  best  statesmanship  of 
the  age.  Shall  we  not  learn  a  lesson  from  the  past, 
and  refuse  to  be  guided  by  the  same  selfish  interest 
that  led  these  other  nations  to  such  calamities?  If 
this  enormous  undesirable  immigration  continues,  and 
if  it  is  really  as  undesirable  as  the  Immigration  Com- 
mission states  in  its  exhaustive  report,  and  as  the 
Commissioner  General  says  in  his  annual  reports,  it  is 
a  prophecy  of  something  that  will  follow  that  is  ap- 
palling to  contemplate. 

There  is  such  a  thing  as  a  people  being  unable  to 
maintain  the  civilization  which  is  given  them,  or 
which  they  inherit.  The  American  Indian  was  unable 
to  sustain  the  civilization  that  the  white  man  pre- 
sented him.  We  all  know  the  result.  The  negro  was 
transplanted  from  Africa  here  into  the  bosom  of  civil- 
ization, and  he,  left  alone,  would  not  carry  forward 
the  white  man's  burden.  The  Hindoo  has  not  taken 
up  with  alacrity  the  civilization  brought  him  by  his 
British  rulers.  The  Chinese  are  only  beginning  to 
imitate  European  civilization.  It  is  unfortunate  that 
these  things  are  true.  Perhaps  we  feel  that  we  are 
encroaching  upon  a  sentiment  in  denying  the  immi- 
gration of  any  people  who  desire  to  come  here,  be- 
cause our  ancestors  came  here  from  somewhere,  but 
when  either  sentiment  or  greed  are  allowed  to  control 
our  policies  on  this  subject  civilization  will  pay  the 
penalty  and  we  will  be  responsible. 

The  greatest  work  of  civilization  is  to  render  it 
possible  to  develop  the  highest  type  of  men  and  wom- 
en, and  reach  the  highest  possible  standard  of  civili- 
zation. This  cannot  be  done  by  intermixing  the  bet- 
ter elements  of  the  race  with  the  lower  types,  or  the 
best  specimen  with  the  lower  specimen  of  any  race. 
Neither  can  it  be  done  when  the  higher  types  have 


Markets   and   Rural   Economics  343 

to  carry  the  burden  of  the  lower  types.  Nor  can  it 
be  done  by  the  higher  types  or  specimens  leaning  on 
the  lower  for  support.  This  is  akin  to  leaning  on 
nature  for  support  in  the  profligate  tropics — it  ener- 
vates and  weakens  initiative.  Approximate  segrega- 
tion is  the  only  hope  for  the  noblest  development  of 
the  superior  race. 

LESSON  XLIX 

How  does  the  percentage  of  home-owners  stand 
in  Denmark,  Germany,  Great  Britain? 

What  can  you  say  of  the  tendency  to  land  monop- 
oly in  this  country? 

How  about  the  timber  monopoly? 

What  does  Plutarch  say  about  ancient  Italy? 

What  was  the  language  of  Tiberius  Gracchus  on 
this  subject? 

What  does  Pliny  say  concerning  conditions? 

What  can  you  say  of  land  monopoly  in  Great 
Britain? 

What  did  Richard  Cobden  say  on  this  point? 

What  has  been  the  effect  on  English  progress? 

What  can  you  say  of  the  work  of  David  Lloyd- 
George  ? 

What  is  being  done  for  Ireland's  landless? 

What  broke  feudal  landlordism  in  Germany? 

What  broke  feudal  landlordism  in  France? 

LESSON  L 

What  of  the  tendency  toward  tenancy  in  the 
United  States? 

Were  -you  to  swap  places  with  the  landlord  and 
the  tenants,  what  would  result? 


344  Markets    and   Rural   Economics 

What  can  you  say  of  bonanza  farming? 

State  its  advantages  and  disadvantages. 

What  have  been  the  greatest  events  in  the  world's 
history? 

How  are  future  events  mirrored  in  the  present? 

What  of  the  industrial,  moral,  and  social  effects 
of  indiscriminate  immigration  of  all  races  and  na- 
tionalities? 

What  are  the  views  of  Prof.  John  R.  Commons? 

Of  Hugh  Chalmers? 

What  of  the  class  of  immigrants  pouring  into  the 
country  now? 

What  conditions  were  prophetic  of  Rome's  fall? 

Of  France's  Reign  of  Terror? 

Of  England's  revolution  under  Cromwell? 

Of  England's  American  Revolution? 

Of  our  Civil  War? 

What  do  our  conditions  portend? 


CHAPTER  XXXIV 
THE  FARMER  AND  THE  SOIL 

How  can  the  highest  development  of  the  best  types 
of  races  be  secured? 

Farmers,  huntsmen  and  fishermen  have  fed  the 
human  race,  and  a  great  part  of  the  animals,  since 
the  morning  creation,  and  will  continue  to  do  so  till 
the  crack  of  doom. 

Man's  existence  on  the  earth  depends  on  his  ability 
to  make  the  soil  yield  him  a  subsistence. 

Civilization  is  dependent  on  man's  ability  to  wring 
from  nature  more  than  a  subsistence. 

Man  cannot  rise  above  the  crudities  of  barbarism 
without  a  surplus  production. 

In  no  department  of  human  endeavor  has  the  strug- 
gle been  longer,  harder  and  slower  of  accomplish- 
ment than  in  the  mastery  of  the  soil. 

The  relationship  of  fertility,  season,  climate  and 
cultivation  determines  the  production.  Scientific  agri- 
culture is  of  recent  date.  Millions  of  farmers  do  not 
yet  practice  it. 

The  continents  of  the  earth  are  solemn  reminders 
of  man's  improvidence  with  the  soil.  Countries  once 
fertile,  populous  and  prosperous  are  long  since  bar- 
ren, and  give  meager  support  to  a  sparse  population. 

Egypt  once  had  three  times  the  population  she  now 
has;  Thebes,  Luxor,  Memphis,  Alexandria  and  Cairo 
were  great  cities  in  the  Valley  of  the  Nile;  only  Cairo 


346  Markets    and   Rural   Economics 

is  left,  and  it  is  not  nearly  what  it  might  be.  But 
for  the  periodic  floods  of  the  Nile,  Egypt  would  have 
been  barren  long  ago.  Goshen  is  not  what  it  was 
when  Israel  dwelt  there. 

Western  Asia  used  to  support  its  teeming  millions, 
and  had  flourishing  cities,  both  inland  and  on  the 
shores  of  the  seas.  In  the  valleys  of  the  Euphrates 
and  Tigris  rivers  flourished  Babylon  and  Ninevah, 
queen  cities  of  the  East.  But  even  the  roving  Bedouin 
will  not  pitch  his  tent  on  the  ruins  of  Babylon,  and 
Ninevah  is  no  more.  Jerusalem,  the  city  of  Israel's 
glory,  Caesarea,  Sidon,  Tyre,  Damascus,  Ephesus, 
and  other  cities  of  the  Levant,  drew  their  support 
from  this  region,  which  has  deteriorated  as  though 
there  were  a  curse  upon  the  country.  Destruction  of 
the  forest  and  bad  farming  has  done  its  work  and 
its  power  to  produce  is  irretrievably  lost. 

Greece,  Italy,  Northern  Africa,  India,  and  China 
have  the  same  story  of  ruthless  destruction  of  for- 
ests and  lack  of  conservation  of  the  soil  resulting  in 
barrenness,  gullies,  waste  lands,  quick  drainage  and 
flooded  river  valleys,  drowning  thousands  and  work- 
ing havoc  to  millions  of  acres  of  farm  lands.  Greece 
has  no  rivers  to  overflow,  but  her  mountains  and  hills 
are  bare,  and  Greece  is  but  a  skeleton  of  her  former 
self.  Italy  furnishes  a  terrible  example  of  how  a 
country  can  deteriorate  both  in  soil  and  citizenship 
as  under  a  blight,  a  ghastly  relic  of  her  former  rich- 
ness and  intellectual  greatness.  The  land  of  Carth- 
age, that  disputed  so  long  the  mastery  of  the  world 
with  Rome,  has  little  to  remind  us  of  its  former  opu- 
lence and  wonderful  resources.  Thousands  of  lives 
have  been  lost  in  the  floods  of  China  because  of  the 
quick  drainage  of  her  lands,  caused  by  denuding  the 
country  of  all  its  timber  and  the  crude  agriculture 


Markets   and   Rural   Economics  347 

that  fails  to  sink  the  water  where  it  falls.  In  India 
more  people  starve  every  year  than  in  all  the  rest 
of  the  world  together.  Though  both  India  and  China 
support  teeming  populations  it  is  on  so  low  a  standard 
of  living  that  it  is  impossible  for  the  people  to  ever 
rise  to  a  high  standard  of  civilization. 

Wasteful  methods  of  agriculture  were  halted  in 
France,  Germany,  the  Netherlands,  Denmark  and 
in  Britain.  In  the  United  States  the  most  wasteful 
methods  were  followed  for  a  hundred  years,  with 
frightful  results.  A  virgin  forest  was  destroyed  as 
if  it  were  an  enemy  to  the  race.  Go  from  Maine  to 
Mississippi,  along  the  Atlantic  slope,  and  you  will 
see  millions  and  millions  of  acres  that  attest  the  reck- 
lessness with  which  the  American  farmer  has  treated 
the  soil.  Other  regions  show  the  same. 

Quick  drainage  in  the  Mississippi  Valley  results  in 
floods  and  much  destruction  during  the  spring  rains. 

But  a  halt  has  been  called,  and  scientific  agriculture 
is  doing  wonders  in  the  way  of  production  and  con- 
servation. A  farm  hand  in  some  States  produces  sev- 
eral times  as  much  as  he  does  in  other  States.  This 
is  due  to  several  causes:  fertility  of  the  soil,  number 
of  acres  that  can  be  cultivated,  and  character  of  crops 
raised. 

Year  after  year  the  percentage  of  the  population 
that  are  farmers  is  less  and  less.  While  this  places 
a  greater  responsibility  on  the  field  laborer,  to  feed 
the  millions  in  other  vocations,  it  at  the  same  time 
gives  the  farmer  additional  power  over  the  human 
family.  There  is  no  difference  in  the  inborn  selfish- 
ness of  people  following  different  callings.  The  farm- 
er is  selfish  enough  to  make  use  of  this  new  power  if 
he  only  realized  that  he  had  it.  Mutual  bickerings 
and  jealousies  and  strife  keep  the  rural  population 
from  ruling  the  earth. 


348  Markets    and  Rural   Economics 

Twelve  and  a  half  million  field  hands  make  it  pos- 
sible to  feed  and  clothe  ninety  million  people  at  home 
and  millions  beyond  the  seas.  With  the  very  key 
to  the  life  and  death  of  the  rest  of  the  world  there 
is  nothing  to  hinder  these  workers  of  the  soil  from 
being  absolute  masters  of  the  world !  The  only  rea- 
son they  are  not  is  because  they  are  not  agreed  among 
themselves. 

At  the  beginning  of  this  government  nine-tenths  of 
the  people  lived  on  farms.  Today  a  strike  on  the 
part  of  one-tenth  of  the  population  (who  work  in  the 
fields)  during  the  four  months  in  the  Spring  would 
produce  a  famine  that  would  starve  millions  of  peo- 
ple and  send  prices  skyward. 

The  actual  farming  class  constitutes  about  three- 
tenths  of  the  population,  and  it  owns  about  one-fifth 
of  the  aggregate  wealth.  But  only  a  part  of  them 
own  this  percentage,  as  millions  of  them  have  prac- 
tically nothing.  Half  of  them  have  no  homes,  but 
hire,  rent,  or  crop  from  year  to  year. 

Where  will  it^all  end? 

Let  him  be  industrious  or  indolent,  thrifty  or  thrift- 
less, honest  or  dishonest,  progressive  or  unprogress- 
ive,  intelligent  or  ignorant,  the  farmer  is  the  de- 
pendence of  the  human  race  for  its  existence. 

Whether  the  soil  be  fertile  or  poor,  whether  it  be 
hills  and  mountains  or  plains  and  valleys,  whether 
timber  lands  or  prairies,  whether  covered  with  the 
snows  of  winter  or  forever  wrapt  in  the  sunshine  of 
the  tropics,  it  is  the  source  of  wealth  and  man's  de- 
pendence for  greater  possibilities  in  the  future. 

To  ignore  the  farmer  and  his  welfare  is  an  economic 
crime  sure  of  punishment.  To  neglect  the  soil  is  to 
throw  away  the  richest  heritage  of  the  race. 

Agricultural  colleges  are  doing  great  work,  but 
they  reach  only  a  small  percentage  of  the  farmers. 


Markets   and  Rural   Economics  349 

It  is  like  publishing  text  books  and  educating  teachers, 
and  then  not  bringing  them  and  the  students  together. 
Demonstration  work  is  the  next  step  in  the  direc- 
tion of  preparing  the  farmer  for  his  task  of  master- 
ing the  elements  of  nature,  and  bringing  to  the  aid 
of  industry  the  accumulated  experience  of  years  of 
investigation  and  experiments.  The  whole  of  society 
is  vitally  concerned,  and  niggardliness  here  is  short- 
sightedness, which  will  react  on  all.  Progress  can- 
not be  sustained  in  business  or  public  economics  with- 
out prosperity  on  the  farm,  and  it  behooves  the  state 
to  take  greater  interest  in  this  department  for  the  ulti- 
mate welfare  of  all  classes. 

THE  MOST  IMPORTANT  PRODUCT  OF  THE  FARM 

The  farmer's  business  is  called  agriculture,  which 
means  land  culture.  But  by  an  extension  of  the  use 
of  the  word  it  has  grown  to  include  stock  culture,  hor- 
ticulture, and  the  general  culture  of  things  produced  on 
the  farm.  It  is  worth  while  to  improve  corn,  cotton, 
potatoes,  cabbages,  oats,  wheat,  grass,  cows,  sheep, 
horses,  swine,  etc.  It  is  worth  while  to  get  the  best 
labor-saving  and  work-doing  machinery;  it  is  worth 
while  to  adopt  the  best  methods  of  dairying,  of  sow- 
ing, reaping  and  doing  the  general  work  of  the  farm; 
it  is  worth  while  to  know  as  much  as  possible  about 
scientific  agriculture,  and  to  acquire  skill  in  the  art 
of  applying  scientific  principles  to  farming;  it  is  worth 
while  to  improve  the  soil  and  render  it  easy  to  pro- 
duce a  superabundance  of  all  that  man  needs  to  grow 
from  the  earth. 

But  there  is  something  far  more  worth  while  than 
all  the  above  combined — the  production  and  culture 
of  Young  America — the  boys  and  girls  of  the  farm. 

The  farmer  ought  to  take  more  pride  in  himself 
than  in  his  stock.  He  ought  to  see  to  it  that  he  and 


35°  Markets    and  Rural  Economics 

his  wife  and  his  children  improve  faster  than  his  farm 
or  his  domestic  animals.  While  he  enriches  his  land 
he  should  enrich  his  mind. 

The  best  products  are  in  the  house  and  they  should 
receive  the  most  care,  time,  and  labor.  The  farm  and 
its  equipments  are  for  the  benefit  of  the  dwellers  in 
the  house  and  not  an  end  themselves.  They  are  merely 
helps  for  the  family,  a  means  to  and  end  always,  and ' 
not  an  end  to  be  sought,  just  for  its  own  sake. 

If  the  family  become  slaves  to  the  farm  and  its 
stock,  the  slavery  is  unprofitable  and  the  drama  a 
pathetic  one.  Many  a  farmer  mortgages  himself  to 
his  farm  and  works  for  it  through  life  with  no  view 
of  his  own  improvement.  His  only  dream  is  to  im- 
prove the  farm  and  get  as  much  profit  out  of  it  as 
possible.  Many  a  farmer's  family  are  drudges  to 
make  the  farm  profitable  without  any  view  to  making 
it  merely  a  physical  basis  for  intellectual  develop- 
ment, by  producing  enough  to  enable  the  family  to 
have  leisure  time  in  which  to  improve  the  mind  and 
become  intelligent  citizens. 

The  finest  fields  are  those  of  the  household,  and 
yet  they  are  often  the  ones  most  neglected.  The 
world  needs  more  rich  farmer  minds.  Of  all  the 
things  that  the  farmer  cultivates,  he  needs  cultivation 
most,  and  is  the  most  susceptible  of  improvement. 
The  great  men  of  the  world  made  themselves  so  by 
dreaming  while  at  work,  and  in  spare  time  putting 
the  dream  into  effect.  It  has  always  been  so,  and 
must  necessarily  be  so  for  all  time  to  come. 

The  food  question  is  a  great  one.  It  is  great  be- 
cause it  is  a  means  to  an  end,  and  the  end  is  the 
sustenance  of  the  human  race,  primarily,  and  its 
proper  use  is  a  great  factor  in  preserving  the  health 
of  the  world's  inhabitants.  Man  is  first  an  eater, 


Markets    and   Rural   Economics  351 

and  the  first  requirement  he  must  supply  by  his  own 
exertion  is  food.  Life  is  dependent  upon  it,  and 
health  upon  its  proper  use.  The  best  medicine  is 
right  eating.  Health  is  force — the  friend  of  energy, 
happiness,  thrift  and  work.  It  is  estimated  that  three 
million  years  of  life  are  wasted  every  year  in  the 
United  States  through  serious  illness,  most  of  which 
is  preventable ;  that  the  average  expenditure  for  each 
family  for  illness  and  death  is  $27.00  per  annum. 

It  is  the  office  of  the  human  stomach  and  brain  to 
transmute  food  into  thoughts,  energy,  character. 
However  earthly  all  this  may  sound,  and  however 
much  it  may  grate  on  our  feelings  to  realize,  the  fact 
stands. 

But  this  transmutation  is  brought  about  not  by  stom- 
ach food  alone.  The  brain  must  be  fed  the  same  as 
the  stomach.  Feeding  the  brain  is  as  necessary  to 
the  mind  as  feeding  the  stomach  is  to  the  body.  The 
body  is  of  no  importance  except  to  be  used  by  the 
mind.  It  is  a  difficult  task  to  educate  a  family  of 
children  in  letters  on  the  farm  while  all  the  care  and 
work  of  the  farm  are  on  the  members.  To  help  out 
this  difficulty,  schools  are  established  where  all  the 
children  of  the  neighborhood  are  taught  by  those 
especially  qualified  for  the  task. 

The  children  of  the  farmer's  home,  who  go  out 
from  his  household  to  supply  the  villages  and  cities 
with  a  healthy,  brainy,  hearty  population,  are  infin- 
itely more  important  than  all  other  products.  How 
many  fine  boys  and  girls  go  from  the  farms  into  the 
schools  and  colleges  to  become  teachers,  professional 
men  and  women,  clerks,  nurses,  telegraphers,  artists, 
journalists,  authors,  engineers,  merchants,  bankers, 
railroad  men  and  government  employees !  The  farm 
has  furnished: 


35 2  Markets    and   Rural   Economics 

Ninety-two  per  cent,  of  our  presidents. 

Ninety-one  per  cent,  of  our  governors. 

Eighty-three  per  cent,  of  our  cabinet  officers. 

Seventy  per  cent,  of  our  senators. 

Sixty-four  per  cent,  of  our  congressmen. 

Fifty-five  per  cent,  of  our  railroad  presidents. 

Men  and  women  are  the  chief  products  of  the 
world;  all  things  else  are  of  little  importance,  except 
as  a  means  of  race  production  and  improvement. 

To  raise  a  lot  of  children  who  have  no  ambition, 
aspiration  or  purpose;  no  taste,  no  culture,  no  refine- 
ment; no  energy,  capacity,  or  talent,  is  to  be  unfortu- 
nate. A  family  of  bright  children  is  the  greatest 
possible  legacy  to  leave  in  the  world. 

A  farm  home  should  be  as  attractive  as  a  city  home. 
It  will  have  to  be  if  the  boy  or  girl  that  is  really 
worth  while  is  to  be  expected  to  remain  on  the  farm. 
A  farm  home  without  a  library  is  a  burlesque  on  civil- 
ization. A  neglected  mind  is  a  greater  misfortune 
than  a  neglected  farm. 

Fd  rather  add  convolutions  to  the  brain  of  a  stu- 
dent than  to  reclaim  a  sea  of  gullies.  I'd  rather  in- 
spire a  noble  purpose  in  one  young  man  or  woman 
with  the  quality  of  perseverance  that  leads  to  accom- 
plishment than  to  accumulate  a  million  and  die  with 
the  scorn  of  the  world  as  my  recompense.  I'd  rather 
see  a  generation  of  people  untrammeled  and  uncon- 
taminated  with  the  sins  of  their  parents  than  to  see 
every  acre  of  the  earth  as  rich  as  the  valley  of  the 
Nile  I 

He  who  grows  a  new  idea  destined  to  take  a  tear 
from  the  cheek  of  unpaid  toil  or  strike  a  crime  from 
the  calendar  of  law  is  worth  more  to  the  world  than 
he  who  makes  a  thousand  grains  grow  where  one 
grew  or  who  accumulates  untold  millions. 

He  who  forges  a  new  thought  at  the  furnace  of 


Markets   and  Rural   Economics  353 

intellect,  that  goes  ringing  through  the  ages  to  broad- 
en the  minds  of  coming  generations,  performs  a 
greater  service  for  mankind  than  he  who  lays  his 
hand  on  the  finances  of  a  nation  and  dictates  panics 
to  a  hemisphere. 

To  save  one  great  life  from  being  the  victim  of 
some  physical  or  moral  blight  is  a  sublimer  service 
to  render  the  race  than  to  make  a  desert  blossom  as 
the  rose. 

The  only  time  I  feel  worthy  of  the  proud  title  of 
man  is  when  I  am  willing  to  work  for  the  happiness 
of  others,  who  may  never  know  that  I  ever  lived. 

LESSON  LI 

Upon  what  does  man's  existence  on  earth  depend? 

What  is  surplus  production? 

What  determines  production? 

What  evidence  of  improvident  farming  in  Asia? 
In  Africa?  In  Greece?  In  Rome?  In  China?  In 
India?  In  the  United  States? 

Where  has  improvident  farming  been  halted? 

Whence  the  source  of  man's  support  in  all  ages? 

What  can  you  say  of  the  work  of  Agricultural 
Colleges  and  the  demonstration  work? 

Can  permanent  prosperity  exist  without  prosperity 
on  the  farm? 

LESSON  LII 

What  is  the  most  important  product  of  the  farm? 

Which  should  be  of  the  most  concern  on  the  farm? 

Where  should  the  best  product  of  the  farm  be 
found  ? 

Is  there  such  a  thing  as  a  farmer  being  a  slave  to 
his  farm? 


354  Markets   and  Rural  Economics 

How  should  a  farm  be  considered? 

Where  are  the  fields  of  most  importance? 

How  have  men  become  great? 

How  much  is  estimated  as  lost  annually  in  the 
United  States  through  illness? 

How  are  thoughts,  energy,  character,  supported 
and  developed? 

Of  what  use  is  the  body? 

Why  were  schools  founded? 

Give  the  percentages  of  places  of  high  positions 
which  have  been  filled  by  farmers. 

What  can  you  say  of  a  farm  home  without  a 
library? 

What  can  you  say  of  a  farm  home  with  a  neglected 
mind? 

Who  is  the  greatest  benefactor  of  the  human  race? 

When  is  one  really  worthy  of  the  proud  title  of 
Man? 


APPENDIX 

GENERAL  FORM   FOR  COOPERATIVE 
MARKETING  ASSOCIATION 

SECTION  i — NAME 

This  association  shall  be  known  as  the  ( 

County    Fruit  Association)    incorporated   under  the 

laws   of   the    State   of    Its 

place  of  business  shall  be  in  the  (City  of )  * 

NOTE. — The  name  should  indicate  the  territory  cov- 
ered and  the  class  of  products  handled.  Thus,  "The  Maine 
Potato  Shippers'  Exchange,"  'The  Richmond  Egg  Circle," 
etc.  Practically  every  association  should  be  incorporated 
under  the  laws  of  the  State  where  it  is  located. 

SECTION  2 — OBJECTS 

The  objects  of  this  association  shall  be  to  encourage 
better  and  more  economical  methods  of  production 
and  distribution;  to  secure  better  results  in  grading, 
packing,  marketing,  standardizing,  and  advertising 
our  products;  to  buy  supplies  in  a  cooperative  way; 
to  rent,  buy,  build,  own,  sell  and  control  such  build- 
ings and  other  real  and  personal  property  as  mav  be 


*A11  matter  appearing  in  parenthesis  is  simply  suggestive, 
and  is  to  be  altered  to  suit  the  best  interests  of  each  individual 
association. 


356  Markets    and    Rural    Economics 

needed  in  the  business;  to  cultivate  the  cooperative 
spirit  in  the  community  and  to  perform  any  other 
work  which  may  tend  to  the  betterment  of  the  mem- 
bers and  the  uplift  of  the  neighborhood. 

NOTE. — Make  the  objects  as  definite  as  possible,  but  it 
is  also  well  to  include  a  "blanket,"  which  will  cover  any 
future  efforts  of  the  association. 

SECTION  3 — MEMBERSHIP 

All  eligible  and  accepted  members  shall  sign  these 
rules,  and  contribute  their  share  of  capital  stock  or 
other  regular  investment  prescribed. 

NOTE. — There  may  be  conditions  where  it  would  be 
wise  to  limit  membership  to  those  who  have  been  recom- 
mended by  the  Directors  or  who  have  received  a  two-thirds 
vote  of  the  members  present  at  any  meeting.  It  is  doubtful 
if  "chronic  kickers"  should  ever  be  admitted.  The  admission 
of  merchants,  bankers,  etc.,  is  almost  invariably  bad  policy, 
not  because  they  are  not  good  men  but  their  membership 
is  incongruous  in  these  associations. 

SECTION  4 — MEETINGS 

1.  The  annual  meeting  of  the  association  shall  be 

held  on  the in  each  year.     Notice  of 

such  meeting  shall  be  given  each  member  in  writing 
by  the  Secretary,  and  by  publication  in  the  local  paper 
if  convenient  less  than   (one  week)   previous  to  the 
date  of  meeting. 

NOTE. — The  annual  meeting  should  be  held  as  soon  after 
the  close  of  the  year's  main  business,  as  will  allow  for  the 
settlement  of  all  accounts,  auditing  the  books  and  the  prepara- 
tion of  the  annual  reports  of  the  officers. 

2.  Special  meetings  may  be  called  at  any  time  by 
the  President.     He  shall  call  such  meetings^whenever 

members  shall  in  writing  so  request.     A 

notice  of  such  special  meeting  shall  be  sent  to  each 
member  at  least    (five)    5   days  before  the  date  of 
said  meeting,  which  notice  shall  give  the  nature  of 
the  business  to  be  transacted.     A  similar  notice  shall 
be  given  for  all  adjourned  meetings. 


Markets    and    Rural    Economics  357 

SECTION  5 — QUORUM 

(One-fifth)  the  members  in  good  standing  shall 
constitute  a  quorum  for  the  transaction  of  business 
at  any  meeting. 

SECTION  6 — OFFICERS 

1.  At  each  meeting  a  Board  of Directors 

shall  be  elected.     A  President,  Vice-President,  and 
Secretary-Treasurer  shall  be  chosen  by  the  Directors 
from  among  themselves  at  the  first  Board  meeting 
after  the  annual  meeting.    They  shall  also  choose  two 
auditors  from  the  members  if  available.     All  officers 
shall  be  elected  by  ballot  and  shall  perform  the  usual 
work  of  such  officers.      (Four)   Directors  shall  con- 
stitute a  quorum  at  any  Board  meeting. 

2.  The  Board  shall  employ  a  Business  Manager, 
who  shall  have  charge  of  the  business  of  the  Asso- 
ciation, under  the  direction  of  the  Board,  who  shall 
fix  his  compensation. 

NOTE. — In  a  large  organization  it  would  be  well  to 
unite  the  Office  Manager,  Secretary  and  Treasurer  in  one 
person,  as  frequent  audits  and*  counter  signature  of  checks, 
vouchers,  etc.,  would  serve  as  a  sufficient  check.  The  com- 
bining of  these  in  one  individual  centers  all  the  office  work 
and  tends  to  greater  efficiency. 

3.  All  officers,  who  may  handle  any  of  the  funds 
or  other  property  of  the  Association,   shall  give  a 
surety  bond  in  excess  of  the  funds  which  they  are 
liable  to  handle  at  any  one  time.     The  cost  of  such 
bonds  shall  be  paid  for  by  the  Association. 

SECTION  7 — CAPITAL  STOCK 

i.  The  capital  stock  of  this  association  shall 
be  .  .  divided  into  .  .  shares 


Markets    and   Rural    Economics 

of each.     No  member  shall  hold  more 

than  (ten)  per  cent,  of  the  outstanding  stock  of  the 
association. 

2.  Transfers  of  shares  shall  only  be  made  upon 
the  books  of  the  association  when  the  stockholder 
is  clear  from  all  indebtedness  to  the  association. 

3.  A  stockholder,  desiring  to  dispose  of  his  shares, 
must  first  offer  them  to  the  association,  through  the 
Board  of  Directors,  at  market  value. 

NOTE. — This  provision,  if  desired,  must  be  provided  for 
in  the  articles  of  incorporation,  to  make  it  legal.  To  allow 
outsiders  to  purchase  association  stock  might  transfer  the 
control  of  the  organization  to  those  who  are  opposed  to 
its  continuance. 

NOTE  ON  CAPITAL  STOCK.— In  case  the  business  of 
an  association  is  such  as  to  only  require  a  small  amount  of 
money  and  that  only  for  a  short  time  during  each  year,  it 
may  not  be  necessary  to  have  any  capital  stock.  Annual 
dues  may  be  collected.  The  following  plan  has  in  such  cases 
worked  well,  where  the  local  banks  are  prepared  and  willing 
to  make  such  loans.  Where  this  plan  is  adopted  the  follow- 
ing will  take  the  place  of  the  preceding  section: 

SECTION  7 — FINANCING 

1.  At  the   time   of  uniting  with  the   association 
and  at  the   end  of  each  three  years   after  the   in- 
corporation  of   the   association,    each   member   shall 
give   a  promissory  note,  payable  on  demand  to  the 
association.      This   note    shall    be    for   the    sum    of 
($25.00)    and  an  additional    ($1.00)    for  each  and 
every   acre   of   crops,    to   be   marketed   through   the 
association,  then  owned  by  the  member.     But  in  no 
case  shall  this  note  be  for  a  less  sum  than  ($35.00). 
When  a  new   note   is  given,   the   old  one   shall  be 
cancelled  and  returned  to  the  maker. 

2.  These  notes  shall  be  the  property  of  the  asso- 
ciation  and  shall  be  used  by  the   Directors   as  col- 


Markets    and    Rural    Economics  359 

lateral  security  with  which  to  borrow  needed  money 
for  the  association's  business.  Whenever  these  notes 
are  deposited  as  security  for  a  loan,  all  of  the  mem- 
bers shall  individually  share  the  liability  in  propor- 
tion to  the  face  value  of  their  respective  notes. 

3.  Each  member  shall  pay  an  annual  membership 
fee  of  $2.00  payable  January  i. 

4.  The  capital  and  credit  thus  obtained  shall  be 
used  as  directed  by  the  stockholders  in  regular  or 
called  session. 

SECTION  8 — GRADING  AND  INSPECTING 

1.  All  goods  produced  for  sale  by  the  members 
shall  be  delivered  to  the  association  as  directed  by 
the  Manager,  in  prime  condition  for  grading,  pack- 
ing and  shipping.     All  grading  and  packing  done  on 
the  grower's  premises  must  be  in  accordance  with  the 
rules  of  the  association  and  subject  to  such  inspection 
as  may  be  established  by  the  Directors. 

2.  All  produce  for  shipment  shall  be  inspected 
before  shipment,  and  if  any  produce  is  not  of  good 
quality  and  in  good  condition  for  shipping,  such  pro- 
duce shall  be  sorted  or  otherwise  prepared  for  ship- 
ment,  at  the   expense   of  the  party  to  whom   such 
produce  belongs. 

3.  All  brands,  labels,  trade  marks,  etc.,  shall  be 
registered  and  become  the  property  of  the  associa- 
tion and  they  shall  be  only  attached  to  such  grades 
as  shall  be  ordered  by  the  Board  of  Directors. 

SECTION  9 — DUTIES  AND  RIGHTS  OF  MEMBERS 

i.     A  member  shall  have  the  right  to  give  away 
or  retain  for  his  own  use  such  of  his  farm  products 


360  Markets    and   Rural    Economics 

as  he  may  wish,  but  he  shall  not  make  sale  of  crops, 
promised  to  the  association,  to  any  outside  parties, 
except  any  product  not  accepted  by  the  association. 

2.  In  case  any  member  is  offered  a  price  in  excess 
of  the  price  then  obtainable  by  the  association,  said 
member  shall  turn  said  bid  over  to  the  association 
for  filling  from  said  member's  goods. 

NOTE. — Some  such  provision  is  necessary,  to  prevent  an 
outside  disgruntled  dealer  from  making  a  false  bid,  to  test 
a  member's  loyalty  and  arouse  dissension,  with  the  idea  of 
disrupting  the  organization.  Allowing  the  organization  to 
handle  this  bid  compels  the  mischiefmaker  to  "put  up  or  shut 
up";  the  grower  gets  the  boosted  price,  if  the  bidder  does 
not  back  down,  and  the  organization  handles  the  deal  and 
so  is  strengthened  rather  than  injured.  One  or  two  such 
experiences  has  usually  discouraged  this  very  common  form 
of  outside  interference. 

3.  Each  member  shall  have  a  number  or  mark, 
which  shall  be  permanently  stamped  on  every  sack, 
box,  barrel,  crate,  basket,  or  other  package  shipped 
by  him  through  the  association.    Any  loss  occasioned 
by  improper  packing  or  grading  shall  be  charged  to 
the  member  whose  mark  is  found  on  said  package. 

NOTE. — Products  packed  on  the  grower's  premises 
should  be  inspected  as  they  are  being  packed,  by  an  associa- 
tion inspector.  He  may  be  employed  and  paid  by  the  grower 
to  assist  in  packing,  but  he  must  be  held  accountable  alone 
to  the  association  for  his  inspection  work.  His  own  private 
mark  should  be  placed  upon  each  package  he  packed  or 
inspected  and  he  should  be  held  jointly  responsible  with  the 
grower  for  the  pack,  as  it  may  be  disclosed  in  the  final 
market,  ordinary  deterioration  excepted. 

4.  Each  member  of  the  association  shall  have  one 
vote  and  only  one;  providing  all  claims   and  dues 
against    said   member   have    been  .fully   paid.      No 
proxies  shall  be  allowed. 

NOTE. — In  a  stock  company  which  is  organized  to 
earn  profits  on  the  money  invested  in  the  business,  a  member 
votes  in  proportion  to  the  number  of  shares  he  holds.  But 
the  true  cooperative  association  is  based  on  the  individual 


Markets    arid    Rural    Economics  361 

member,  a  number  of  whom  unite  to  do  something  in  which 
they  have  a  common  interest.  In  the  former  money  rules; 
in  the  latter,  men.  While  there  may  be  cases  where  the  voting 
power  of  the  members  may  be  made  in  proportion  to  the 
acreage  of  their  products  it  will  generally  be  found  that  any 
attempt  to  vary  the  voting  power  of  members  will  be  unwise. 
The  practice  of  allowing  a  member  to  collect  the  proxies 
of  absent  members  and  vote  the  same,  possibly  giving  a 
single  member  the  control  of  power,  is  too  dangerous  a 
practice  to  be  allowed. 

In  some  of  the  largest  non-profit  cooperative  associations, 
like  the  California  citrus  fruit  growers,  it  has  been  felt  that 
it  was  neither  fair  nor  wise  to  demand  that  the  large  pro- 
ducing members  should  be  held  to  the  same  vote  as  a  small 
producing  member,  when  their  responsibility  and  liability  are 
so  unequal.  In  such  a  case  the  voting  power  of  members 
can  be  made  proportional  to  the  amount  of  their  products 
or  acreage  handled  through  the  association. 

5.  Any  member  may  withdraw  from  the  associa- 
tion at  any  time  between  (the  first  day  of  December 
and  the  first  day  of  the   following  April)    but  all 
claims  of  whatsoever  nature  must  first  be  settled. 

NOTE. — The  time  of  withdrawal  should  be  fixed  so  as 
to  take  effect  after  the  close  of  a  season's  business  and  be- 
fore another  season  begins.  To  permit  a  member  to  with- 
draw during  a  busy  marketing  season  will  result  in  con- 
fusion and  may  seriously  handicap  the  manager  in  filling  his 
contracts. 

6.  Any  member,  feeling  that  he  has  a  grievance 
or  cause   for  complaint,  may  appeal  to  the   Board 
of  Directors,   or  to. the  members  at  any  regularly 
called  meeting.    No  member  shall  be  temporarily  sus- 
pended or  expelled  from  the  benefits  of  the  associa- 
tion, without  first  being  heard  in  his  own  defense, 
either  by  the  Board  of  Directors  or  by  the  members 
at  a  regularly  called  meeting. 

SECTION   10 — DUTIES  AND  POWERS  OF  THE 
MANAGER 

The  manager  shall  employ  and  discharge  all  labor ; 


362  Markets    and   Rural    Economics 

he  shall  secure  information  as  to  crop  and  market 
conditions  and  furnish  same  to  the  members  on  re- 
quest. He  shall  encourage  the  production  of  the 
best  varieties  of  products  demanded  by  the  trade. 
He  shall  conduct  packing  schools,  in  order  that  grow- 
ers may  become  trained  in  the  best  methods  of  grad- 
ing, packing  and  labeling  their  products.  He  shall 
enter  into  contracts  for  the  sale  of  the  association 
goods.  He  shall  have  entire  charge  of  the  mar- 
keting of  all  association  goods,  subject  only  to  the 
action  of  the  Board  of  Directors  and  the  by-laws 
and  rules  of  the  association. 

NOTE. — The  manager  is  the  most  important  officer  and 
his  powers  must  be  limited  as  little  as  possible.  He  cannot 
be  held  responsible,  if  he  is  to  be  dictated  to  at  will  by 
each  member  or  the  officers  are  to  constantly  meddle  with 
his  work.  This  does  not  imply  that  the  manager  should  be 
a  dictator.  He  takes  the  suggestions  of  the  officers  and 
members  and  from  those  of  his  own  experiences,  he  con- 
structs a  business  plan.  Whenever  a  manager  loses  the  con- 
fidence of  the  members,  he  had  best  be  replaced  with  a 
manager  who  possesses  that  confidence. 

SECTION  n — EXPENSES  AND  PAYMENTS 

1.  The    expenses    of   operating    this    association 
shall  be  met  by  a  percentage  on  returns  for  produce 
sold  by  the  association  or  by  a  fixed  price  per  pack- 
age, the  amount  of  such  charge  to  be  fixed  by  the 
Directors. 

He  shall  have  charge  of  the  grading,  packing  and 
inspection  of  all  association  products  and  shall  have 
control  of  the  brands  and  labels  and  their  use  on  the  as- 
sociation packages  in  accordane  with  the  rules  of  the 
association. 

2.  All  merchandise  purchased  by  the  association 
for  the  use  of  its  members  shall  be  paid  for  in  cash 
by  each  member  on  delivery. 


Markets    and   Rural    Economics  363 

NOTE. — Any    system    of    extending    credit    requires    large 
capital  and  often  results  in  considerable  loss. 

3.  Payment  for  produce  will  be  made  to  the  ship- 
pers on  the  receipt  by  the  association  of  returns  for 
the  sale  of  their  produce,  unless  otherwise  ordered 
by  the  full  Board  of  Directors.  In  making  sales 
all  produce  of  the  same  grade  shall  be  pooled  and 
all  shippers  of  the  same  grade  shall  receive  exactly  the 
same  price. 

SECTION   12 — DIVIDENDS  AND  DAMAGES 

After  the  season's  expenses  are  paid  and  the  proper 
sum  set  aside  as  a  reserve  for  the  depreciation  of 
the  association  property,  the  balance  of  the  season's 
profits  shall  be  divided  as  follows : 

1.  The  stockholders  shall  receive  (six)  per  cent, 
per  annum  on  the  par  value  of  their  stock. 

2.  One-half  the  balance  shall  be  set  aside  as  a 
surplus  fund,  to  increase  the  working  capital  or  to 
finance  future  improvements  until  the  surplus  shall 
amount  to  a  sum  equal  to  the  capital  stock;  by  ma- 
jority vote  of  the  members  it  may  be  made  greater. 

3.  The  balance  shall  be  divided  among  the  mem- 
bers, in  proportion  to  the  value  of  their  shipments 
and  purchases  made  through  the  association  during 
that  season. 

Provided,  that  when  any  member  has  failed  during 
that  season  to  live  up  to  his  agreements,  by  failing 
to  ship  exclusively  through  the  association,  or  by  any 
other  breach  of  his  contract,  and  provided  further 
that  said  failure  on  his  part  has  resulted  in  a  loss 
or  damage  to  the  association,  then  said  defaulting 
member  shall  forfeit  to  the  association  such  a  share 
of  his  dividends  then  due  as  shall  reimburse  said 


364  Markets    and   Rural    Economics 

association  for  the  loss  or  damages  thus  sustained, 
in  lieu  of  liquidated  damages.  Or  the  association 
may  proceed  to  collect  from  said  defaulting  member 
said  damages  out  of  any  other  of  his  funds  or  prop- 
erty. 

NOTE. — Some  courts  have  held  that  to  require  a  mem- 
ber to  pay  his  association  a  fee  for  the  privilege  of  selling 
contracted  products  to  an  outside  dealer  is  in  restraint  of 
trade,  therefore,  illegal.  While  it  may  not  be  legal  for  an 
association  to  penalize  its  members,  it  may  be  found  that 
an  association  can  legally  provide,  as  in  this  last  by-law,  to 
collect  damages  from  a  defaulting  member,  when  losses  or 
damages  have  actually  resulted  from  the  failure  of  the  mem- 
ber to  live  up  to  his  agreements.  Some  form  of  binding 
contract  is  essential  to  hold  the  members  of  an  association 
together.  Many  an  organization  has  failed  because  members 
were  only  bound  by  a  gentleman's  agreement.  A  voluntary 
membership  is  totally  inadequate  for  a  stable  and  long  endur- 
ing organization.  The  laws  of  the  state  should  be  studied, 
so  that  this  by-law  for  holding  the  members  may  be  legally 
drawn. 

SECTION  13 — AUDITING 

The  books  and  business  of  the  association  shall  be 
audited  monthly  by  the  auditors  selected  from  the 
membership.  An  annual  audit  shall  be  made  by  a 
certified  public  accountant  previous  to  the  date  of  the 
annual  meeting,  at  which  meeting  said  report  shall 
be  presented  in  full.  Special  audits  shall  be  made 
upon  order  of  the  Board  or  upon  a  vote  of  the  mem- 
bers at  any  legally  called  meeting. 

NOTE. — While  small  associations  may  not  feel  the  need 
of  such  a  strict  system  of  investigating  the  accounts,  it  will 
pay  to  have  this  work  done  often  and  most  thoroughly.  If  the 
association  business  is  being  done  carelessly,  frequent  audits 
will  make  it  known  and  better  methods  may  be  adopted 
before  any  great  loss  occurs.  The  cost  of  an  expert  ac- 
countant is  more  than  balanced  by  the  confidence  which  it 
gives  the  members  and  effectually  stopping  the  criticism  of 
fault  finders. 


Markets    and    Rural    Economics  365 

SECTION  14 — AMENDMENTS 

These  laws  may  be  amended  at  any  meeting  by  a 
two-thirds  vote  of  the  members  present  in  the  affirma- 
tive. Notice  of  such  proposed  change  must  be  in- 
cluded in  the  call  for  said  meeting. 

Take  note  of  the  following  and  raise  cattle — and 
sell  them  cooperatively. 

We  now  consume  ninety-one  per  cent,  of  our  wheat 
and  ninety-eight  per  cent,  of  our  corn. 
U.  S.  wheat  acreage,  49  million  ac.  yield  14  bu.  per  ac. 
U.  S.  corn  acreage,  1 14  million  ac.  yield  26  bu.  per  ac. 
U.  S.  oats  acreage,  35  million  ac.  yield  32  bu.  per  ac. 
U.  S.  produces  20  per  cent,  of  the  world's  wheat. 
U.  S.  produces  75  per  cent,  of  the  world's  corn. 
U.  S.  produces  24  per  cent,  of  the  world's  oats. 
U.  S.  produces  55  per  cent,  of  the  world's  cotton. 
In  1906  U.  S.  cattle  exported,  525,000  head. 
In  1912  U.  S.  cattle  exported,  105,000  head. 
Decline,  75  per  cent,  in  six  years. 
In  1906,  U.  S.  cattle  imported,  16,000  head. 
In  1912,  U.  S.  cattle  imported,  318,000  head. 
Increase,  2,000  per  cent,  in  six  years. 
•In  1907,  number  of  beef  cattle,  51,566,000. 
In  1913,  number  of  beef  cattle,  36,030,000. 
Decline,  30  per  cent,  in  six  years. 


HOW  TO  ORGANIZE  A  COOPERATIVE 
CREAMERY 

When  the  farmers  of  a  community  decide  to  take 
steps  toward  organizing  a  Cooperative  Creamery  or 
Cheese  Factory,  it  is  advisable  for  them  to  call  for 
assistance  from  the  State  Experiment  Station. 

A  man  familiar  with  the  work  can  give  valuable 
advice  and  information  in  the  way  of  organizing,  lo- 
cating, building  and  equipping  the  factory. 

FIRST  MEETING 

A  temporary  chairman  and  secretary  should  be 
elected:  The  advisability  of  starting  a  creamery  or 
cheese  factory  and  the  location  of  same  should  be 
discussed:  The  value  of  each  share  should  be  de- 
cided upon. 

If  it  be  deemed  advisable  to  form  an  association, 
a  committee  should  be  elected  to  canvass  the  sur- 
rounding territory  to  ascertain  if  there  are  a  suffi- 
cient number  of  stockholders  and  cows  to  warrant 
organizing  an  association. 

ORGANIZATION    AGREEMENT 

(To  be  used  at  First  Meeting) 

We,  the  undersigned  citizens  of County, 

State  of do  hereby  agree  to 

form  ourselves  into  an  association  for  the  purpose 

of    ,  and  to  take  the  number 

of  shares  of  stock,  at  the  rate  of 

dollars  each,   and  furnish  the  milk  or  cream  from 
the  number  of  cows  set  opposite  our  names. 

Provided,   however,   that  if    cows 

and stockholders  are  not  secured  be- 
fore     ,   19 .  . ,  this  agreement  shall  be 

null  and  void. 


Markets    and    Rural    Economics  367 


NAMES  SHARES  COWS 

(Heading  of  Blank  for  Signatures.) 

ARTICLES  OF  INCORPORATION  OF CREAMERY 

We,  the  undersigned  persons,  hereby  become  as- 
sociated for  the  purpose  of  organizing  a  cooperative 
association  under  and  pursuant  to  the  laws  of  the 
State  of for  buying,  selling,  manufac- 
turing and  dealing  in  milk,  cream,  ice  cream,  butter 
and  cheese  and  generally  conducting  a  creamery  busi- 
ness, with  power  and  authority  to  do  and  perform 
all  acts  and  things  usually  requisite  and  necessary  in 
carrying  on  such  business,  and  have  organized  by 
adopting  and  signing  the  following  articles  of  incor- 
poration. 

ARTICLE  I 

The  Name  of  This  Cooperative  Association  shall 

be The  nature  of  its 

business  shall  be  buying,  selling,  manufacturing  and 
dealing  in  milk,  cream,  ice  cream,  cheese  and  butter, 
and  handling,  managing,  owning,  operating  and  con- 
trolling a  creamery  or  creameries  in  the  usual  course 
of  such  business,  and  to  do  and  perform  all  acts 
and  things  usual,  requisite  and  necessary  on  the  prem- 
ises, and  the  principal  place  where  the  business  of 
said  cooperative  association  shall  be  transacted  is  in 

the ,  in  the  County  of 

and  State  of It  shall  have  all  of  the 

power  of  a  body  politic,  to  sue  and  be  sued,  own  real 
and  personal  property  and  exercise  such  power  as  its 
business  demands. 

ARTICLE  II 

The  Time  of  Commencement  of  said  Cooperative 
Association  shall  be  the day 


368  Markets    and   Rural    Economics 

of ,  19..,  and  the  Pe- 
riod of  its  Continuancy  shall  be  twenty  years. 
ARTICLE  III 

The  Amount  of  Capital  Stock  of  Said  Cooperative 

Association  shall  be dollars,  and  shall  be 

divided  into shares  of dol- 
lars each,  and  shall  be  paid  at  such  a  time  and  in 
such  manner  as  the  By-Laws  of  this  Association  shall 
direct. 

ARTICLE  IV 

The  Highest  Amount  of  Indebtedness  or  Liability 
which  said  Cooperative  Association  shall  at  any  time 

contract  shall  not  exceed dollars. 

ARTICLE  V 

The  name  and  residences  of  the  persons  forming 
this  Cooperative  Association  are  as  follows,  to  wit: 

ARTICLE  VI 

The  Government  of  this  Cooperative  Association 
and  the  management  of  its  affairs  shall  be  vested  in 
three  or  five  directors,  and  the  following  officers 
to  wit : 

A  President,  Vice-President,  Secretary  and  Treas- 
urer, and  such  Directors  and  officers  shall  be  elected 
by  ballot  at  the  annual  meeting  of  the  stockholders, 
which  shall  be  held  on  the  last  Tuesday  in  January 
of  each  year. 

ARTICLE  VII 

The  names  of  the  Board  of  Directors  of  this  Co- 
operative Association  are  as  follows:  Presi- 
dent,   ;  Vice-President, 

Secretary,   ;  Treasurer,   ; 

Directors 

ARTICLE  VIII 

The  aforesaid  Board  of  Directors  shall  hold  their 


Markets    and    Rural    Economics  369 

respective  offices  until  their  successors  are  elected  and 
qualified. 

ARTICLE  IX 

This  Cooperative  Association  may  be  dissolved  at 
any  regular  or  special  meeting  of  the  stockholders, 
provided  that  two-thirds  of  such  stockholders  vote 
for  the  dissolution,  and  each  stockholder  shall  have 
but  one  vote  in  person. 

ARTICLE  X 

This,  certificate  of  incorporation  may  be  amended 
at  any  general  meeting  of  the  stockholders  or  at  any 
special  meeting  called  for  that  purpose  upon  ten  days' 
notice  to  the  stockholders. 

IN  TESTIMONY  WHEREOF  we,  the  said  In- 
corporators,  have  hereunto  set  our  hands  and  seals 
this day  of ,  A.  D.  19 .. 

IN  THE  PRESENCE  OF 

State  of 

County  of 

ss. : 

BE   IT   REMEMBERED  THAT  ON  THIS 

day  of ,  A.  D.   19 .  . , 

before  me  a  notary  public  within  and  for  said  County, 

personally  appeared    

to  me  known  to  be  the  persons  described  in  the  above 
and  foregoing  instrument  and  whose  names  are  sub- 
scribed hereto  and  severally  acknowledged  that  they 
executed  the  same  freely  and  voluntarily  for  the  uses 
and  purposes  therein  expressed. 

Notary  Public. 

BY-LAWS 

i.  The  president  shall  preside  at  all  meetings  of 
the  Association.  He  shall  have  power  to  call  special 
meetings  of  the  Association  whenever,  in  his  judg- 
ment, the  business  of  the  Association  shall  require  it. 


37°  Markets    and    Rural    Economics 

He  shall  also,  upon  a  written  request  of  ten  stock- 
holders or  three  members  of  the  board  of  directors, 
call  a  special  meeting. 

2.  The  Vice-President  shall  perform  the  duties  of 
the  President  when  the  latter  is  absent  or  unable  to 
perform  the  duties  of  his  office. 

3.  The  Secretary  shall  keep  a  record  of  all  the 
meetings  of  the  Association  and  make  and  sign  all 
orders  upon  the  Treasurer  and  pay  over  to  the  Treas- 
urer all  money  which  comes  into  his  possession,  tak- 
ing the  Treasurer's  receipt  therefor.     The  Secretary 
shall  make  a  report  to  the  Association  at  its  annual 
meeting,  setting  forth  in  detail  the  gross  amount  of 
milk  and  cream  receipts  and  the  net  amount  of  re- 
ceipts from  products  sold  and  all  other  receipts,  the 
amount  paid  out  for  running  expenses,,  the  sums  paid 
out  for  milk  and  cream,  and  all  other  matters  per- 
taining to  the  business  of  the  Association.     A  like 
statement  shall  be  made  each  month  and  posted  con- 
spicuously in  the  creamery  building  at  the  time  of 
the  division  of  the  previous  month's  receipts  afore- 
said.     The   Secretary  shall  give  bonds  in  the   sum 

of dollars,  same  to  be  approved  by 

the  Board  of  Directors. 

4.  The  Treasurer  shall  receive  and  receipt   for 
all  moneys  belonging  to  the  Association,  and  pay  out 
the  same  only  upon  orders  signed  by  the  Secretary. 

The  Treasurer  shall  give  bond  in  the  sum  of 

dollars,  same  to  be  approved  by  the  board  of  directors. 

5.  The  board  of  directors  shall  hold  at  least  one 
meeting  every  three  months  for  the  purpose  of  as- 
certaining the  true  condition  of  the  affairs  of  the  As- 
sociation.    At  the  meeting  of  the  board  of  directors, 
no  other  persons  shall  have  the  right  to  vote  but  the 
directors,  unless  in  case  of  a  tie,  when  the  President 
shall  be  authorized  to  cast  the  deciding  vote. 


Markets    and    Rural    Economics  371 

6.  A  sinking  fund  shall  be  provided  by  taking 
from  each  pound  of  butterf  at  or  each  hundred  pounds 
of  milk  delivered,  such  amount  as  the  stockholders 
may  vote  at  their  annual  meeting,  such  sinking  fund 
to  be  used  only  for  paying  insurance  and  taxes,  buy- 
ing new  machinery,  and  for  erecting  new  buildings  or 
improvement  of  buildings;  also  for  advancing  money 
on  supplies,  and  for  paying  interest  and  dividend  on 
stock,  if  any  are  paid.     Provided,  however,  that  such 
sinking  fund  may  be  entirely  discontinued  for  a  time 
if  the  board  of  directors  shall  decide  this  to  be  for 
the  best  interest  of  the  Association. 

7.  Each  stockholder  shall  furnish  all  the  milk  and 
cream  from  the  cows  he  has,  all  milk  and  cream  to 
be  sound,   fresh  and  unadulterated,  and  patrons  of 
the  Association  not  stockholders  may   furnish  such 
amounts  of  milk  or  cream  as  they  have.     The  As- 
sociation shall  receive  and  sell  such  milk  or  cream, 
manufacture  the  same  into  butter,  cheese  or  ice  cream, 
and  receive  all  money  from  the  products,  and  from 
money  s,o  received  deduct  such  a  percentage  thereof 
as  shall  have  been  agreed  upon  by  the  Association, 
in  the  by-laws  or  otherwise,  and  deduct  the  running 
expenses  of  the  creamery,  the  remainder  thereof  to 
be  distributed  among  the  stockholders  and  patrons 
proportionately  to  the  amount  of  whole  milk  or  fat 
furnished  by  each. 

8.  All  milk  or  cream  shall  be  delivered  at  the 
creamery  or  cheese  factory  during  the  forenoon  and 
at  least  three  times  a  week;  the  same  to  be  sweet  and 
in  good  condition,  and  if  any  be  found  otherwise,  the 
operator  shall  reject  same.     The  operator  shall  pre- 
serve a  sample  of  each  delivery  of  each  patron's  milk 
or  cream,  testing  same  at  proper  intervals. 

9.  Any  person  sending  to  the  factory  any  impure 


372  Markets    and   Rural    Economics 

or  unhealthy  milk  or  cream,  or  any  milk  drawn  from 
cows  within  fifteen  days  before  or  five  days  after  giv- 
ing birth  to  a  calf,  shall  upon  conviction  thereof  be 
subject  to  a  fine  of  five  dollars  for  the  first  offense, 
for  the  second  offense  ten  dollars  and  for  the  third 
offense  he  or  she  shall  forfeit  his  stock  and  mem- 
bership. 

10.  Salaries  of  all  officers  of  this  Association  shall 
be  fixed  by  the  stockholders, 

1 1.  The  board  of  directors  shall  have  full  author- 
ity to  employ  the  butter  or  cheese  makers,  and  all 
other  help  needed  for  the  operation  of  the  factory. 

12.  Whenever,  from  any  cause,  a  vacancy  occurs 
in  any  of  the  offices  of  the  Association,  the  board  of 
directors  shall  fill  by  appointment  any  such  vacancy, 
and  the  person  so  appointed  shall  hold  the  office  until 
the  next  annual  meeting  of  the  Association  and  he 
shall  have  the  same  power  and  be  subject  to  the  same 
duties  and  liabilities  as  the  officer  regularly  appointed. 

13.  All  shares  shall  be  paid  for  in  cash  or  by  bank- 
able note.     When  a  note  is  given  to  the  Association 
for  stock,   it  may  be  paid  by  a  certain  percentage 
deducted  from  each  pound  of  butterfat  or  each  hun- 
dred pounds  of  milk  delivered  by  the  stockholder. 
Provided,  however,  that  no  certificate  shall  be  issued 
nor  any  interest  paid  on  any  share  of  stock  until  it  is 
fully  paid. 

Be  it  further  provided  that  all  stock  may  be  re- 
tired as  fast  as  money  accrued  from  the  sinking  fund 
will  allow.  All  stockholders  shall  receive  six  (6)  per 
cent,  interest  on  their  stock  until  it  is  retired  by  the 
Association. 

14.  Notice  of  any  meeting  of  the  stockholders  of 
the  Association  shall  be  posted  at  the  factory  bv  the 
Secretary  at  least  ten  days  before  such  meeting.  Three 


Markets    and   Rural   Economics  373 

days'  notice,  posted  in  the  same  manner,  shall  be  given 
before  any  meeting  of  the  board  of  directors. 

Any  stockholder  or  patron  shall  have  the  privilege 
to  appear  before  the  board  at  any  of  their  regular 
meetings  to  present  any  grievance  or  any  other  matter. 

15.  Two-thirds  of  the  stockholders  shall  consti- 
tute a  quorum  at  any  meeting  of  the  Association.     A 
majority  of  the  board  shall  constitute  a  quorum  at 
any  board  meeting. 

1 6.  If  any  competitor  raises  the  price  of  butterfat 
above  its  market  value,  any  stockholder  shall  have 
the  right  to  sell  his  milk  or  cream  to  such  competitor, 
provided  that  the  cream  is  first  weighed  and  tested 
at  the  factory,  and  one  cent  per  pound  of  butterfat 
is  paid  to  the  Association  for  maintaining  the  cream- 
ery.    Violation  of  this  section  shall  render  the  of- 
fender liable  to  the  amount  of  one  per  cent,  of  his 
sales  to  the  competitor  against  his  stock  in  this  com- 
pany. 

17.  These  by-laws  may  be  amended  or  changed 
at  any  annual  meeting  of  this  Association  by  a  two- 
third  majority  of  the  stockholders  present  and  vot- 
ing thereon.     They  may  also  be  changed  by  a  two- 
third  majority  of  the   stockholders   present   at   any 
special  meeting  of  the  Association  called  for  such  pur- 
pose.    A  notice  of  such  meeting,  however,  shall  be 
mailed  to  each  stockholder  at  his  last  known  address 
at  least  ten  days  before  such  meeting. 


BY-LAWS  FOR  AN  EGG-SHIPPING 
ASSOCIATION 

Sec.  i.  This  local  association,  the  Cooperative 
Poultry  and  Egg  Selling  Association,  belongs  to  the 
General  Cooperative  Poultry  and  Egg  Selling  Asso- 
ciation, and  is  subject  to  the  laws  of  the  general 
Association,  which  are  now  in  force,  or  which  in  the 
future  should  be  passed  for  the  regulation  of  each 
Association. 

Sec.  2.  Application  for  membership  must  be  made 
to  the  directors  and  on  their  approval  are  admitted 
to  membership  upon  the  payment  of  $1.00,  which  is 
to  be  used  for  the  general  expenses. 

Sec.  3.  Members  must  deliver  their  eggs  to  the 
individual  appointed  to  receive  them  once  each  week 
during  the  fall  and  winter  months,  and  twice  each 
week  during  the  summer  months. 

Sec.  4.  After  the  hatching  season  is  over,  each 
member  must  take  away  the  male  bird  from  the  flock 
and  produce  infertile  eggs.  No  eggs  delivered  in 
winter  shall  exceed  seven  days  in  age  and  in  the  sum- 
mer shall  not  be  more  than  four  days  old.  Any  mem- 
ber delivering  a  stale  egg  is  punishable  by  a  fine  of 
$1.00,  to  be  collected  by  the  Directors.  This  money 
is  to  be  used  for  equipment.  Repeated  offense  will 
make  the  member  subject  to  dismissal. 

Sec.  5.  The  eggs  must  be  collected  from  the  nests 
every  day.  Eggs  found  in  nests  that  have  been  found 
and  eggs  of  unknown  age  must  not  be  delivered  to 
the  Association  for  sale.  Artificial  eggs  must  be 


Markets    and    Rural    Economics  375 

used  for  nest  eggs  and  no  eggs  must  be  offered  for 
sale  through  the  association  that  a  hen  has  covered 
for  one  night. 

Sec.  6.  'Dirty  eggs,  eggs  below  the  average  in  size, 
or  abnormal  in  shape  must  not  be  delivered,  and  the 
eggs  must  be  kept  in  a  warm  room  in  winter  and  in 
a  cool  dry  room  in  summer,  and  in  delivery  must  be 
protected  from  the  direct  rays  of  the  sun. 

Sec.  7.  Unless  by  special  permission  the  members 
shall  not  purchase  eggs  for  delivery  to  the  Asso- 
ciation. 

Sec.  8.  Each  member  must  have  a  number  which 
is  stamped  on  the  top  end  of  each  egg.  Each  mem- 
ber receives  on  the  payment  of  dues  a  stamp  and 
pad,  and  thirty  one-dozen  cartons  containing  the  name 
of  the  Association  on  the  cover.  Eggs  are  always 
to  be  brought  in  those  cartons  and  in  boxes  made 
according  to  specifications  which  will  be  given  by  the 
Association. 

Sec.  9.  The  receiver  of  the  eggs  must  notify  the 
member  of  the  eggs  brought  by  him  not  suitable  for 
shipment  and  save  them  for  him  until  the  next  visit. 

Sec.  10.  All  collections  must  be  made  by  the  re- 
ceiver who  is  to  be  allowed  one  and  one-half  per 
cent.,  or  not  to  exceed  this  amount  for  handling  the 
eggs.  A  triplicate  pad  with  blanks  running  in  con- 
secutive numbers  must  be  kept  by  the  collector,  one 
sheet  must  be  given  in  to  the  customer,  one  to  the 
bank  where  the  deposits  are  kept,  and  the  tissue  paper 
sheet  in  this  book  must  be  kept  by  the  collector  for 
his  own  files. 

Sec.  ii.  Notice  of  the  withdrawal  must  be  given 
to  the  Directors  thirty  days  in  advance  and  no  mem- 
ber who  withdraws  shall  have  any  share  in  the  profits 
or  equipment,  if  the  withdrawal  takes  place  before 
the  end  of  the  contract. 


376  Markets    and   Rural    Economics 

Sec.  12.  The  Board  of  Directors  is  composed  of 
three  members  elected  by  the  Association — the  chair- 
man, the  secretary  and  the  treasurer.  At  least  two 
of  the  directors  shall  be  ladies.  It  is  the  duty  of  the 
Board  to  see  that  all  regulations  are  complied  with, 
find  markets,  and  audit  the  books. 

Sec.  13.  If  for  any  reason  the  Association  should 
be  dissolved,  the  surplus  that  may  have  occurred  and 
all  money  derived  from  the  sale  of  equipment  shall 
be  divided  among  all  members  in  good  standing. 

Sec.  14.  The  amount  of  the  reserve  fund  is  to  be 
determined  by  the  Board  of  Directors. 

Sec.  15.  These  rules  may  be  changed  by  a  ma- 
jority vote  of  the  members,  provided  the  change  does 
not  conflict  with  the  local  association's  relation  to 
the  general  association. 


ANOTHER  GENERAL  TYPE  OF 
ORGANIZATION 

CONSTITUTION 

Article  i 

Sec.  i.  The  Cooperative  Company  shall  be  com- 
posed of  its  officers,  committee  and  stockholders,  viz. : 
President,  Vice-President,  Secretary-Treasurer,  Ex- 
ecutive Committee  of  five,  and  stockholders  of  the 
Company. 

Article  2 

Sec.  i.  There  shall  be  elected  at  each  annual  meet- 
ing of  the  stockholders  of  this  company  a  President, 
Vice-President,  Secretary-Treasurer,  and  an  Execu- 
tive Committee  of  five. 

Sec.  2.  The  President  shall  preside  over  all  meet- 
ings, and  in  case  of  his  absence  the  Vice-President 
shall  preside;  but  in  the  absence  of  both,  the  members 
present  shall  elect  a  temporary  President  who  shall 
have  all  the  powers  of  the  President. 

Sec.  3.  The  Executive  Committee  shall  have  gen- 
eral management  of  the  Corporate  business.  It  shall 
elect  a  manager,  prescribe  his  duties  and  fix  com- 
pensation. It  shall  require  suitable  bonds  for  the 
Secretary-Treasurer  and  the  Manager  and  approve 
the  same.  It  shall  audit  the  books  of  the  Secretary- 
Treasurer  and  the  Manager  as  often  as  deemed  ad- 
visable and  report  their  findings  to  the  stockholders, 
with  an  itemized  statement  of  all  receipts  and  dis- 
bursements since  last  annual  or  called  meeting.  It 


Markets    and    Rural    Economics 

shall  have  power  to  remove  from  position  any  officer 
or  employee  for  dishonesty,  incompetence,  or  im- 
moral conduct,  and  fill  vacancies  caused  by  death, 
resignation,  or  removal. 

BY-LAWS 

Sec.  i.  The  capital  stock  shall  be  $....,  divided 
into  shares  of  $.  .  .  .  each;  no  member  shall  hold 
more  than  ....  shares.  Each  shareholder  is  en- 
titled to  one  vote. 

Sec.  2.  The  shareholders  at  each  annual  meeting 
shall  elect  officers  for  the  ensuing  year;  said  meet- 
ing shall  be  held  of  each  year  at  such 
place  as  the  Executive  Committee  may  select.  All 
officers  shall  be  elected  by  ballot.  Any  shareholder 
may  vote  by  proxy,  provided  a  written  statement  to 
that  effect  be  filed  with  the  Secretary  of  the  meeting, 
stating  whom  he  has  selected  to  cast  his  vote. 

Sec.  3.  Six  days'  notice  shall  be  given  in  writing 
by  the  President  before  any  called  meeting. 

Sec.  4.  Any  officer  or  member  of  the  Executive 
Committee  shall  be  subject  to  recall  at  any  time  by  a 
majority  vote  of  all  shareholders  of  the  company. 

Sec.  5.  A  special  meeting  may  be  called  at  any 
time  by  the  President,  on  proper  notice,  and  shall  be 
called  on  request  of  a  majority  of  the  Executive  Com- 
mittee or  of  five  per  cent,  of  the  shareholders. 

Sec.  6.  The  Executive  Committee  shall  have 
power  to  set  aside,  out  of  any  money  belonging  to 
the  Company,  as  an  emergency  fund,  a  sum  not  to 
exceed  ten  per  cent,  of  the  capital  stock. 

Sec.  7.  The  compensation  of  all  officers  shall  be 
fixed  by  the  stockholders  at  the  regular  annual  meet- 
ings. 

Sec.  8.  All  net  earnings  of  the  company,  except 
the  emergency  fund,  shall,  on  or  immediately  after 


Markets    and    Rural    Economics  379 

the  regular  annual  meeting,  be  paid  to  the  share- 
holders in  proportion  to  shares  held  by  each,  until  the 
original  amount  of  shares  shall  have  been  refunded; 
after  which  each  shareholder  shall  receive  not  to  ex- 
ceed six  per  cent,  on  his  share;  the  remainder  of  the 
net  earnings  shall  be  paid  to  those  who  contribute  to 
the  company  by  patronage,  to  each  in  proportion  to 
his  patronage — provided  this  payment  be  made  only 
to  members  of  the  Cooperative  Company. 

Sec.  9.  There  shall  be  no  preferred  stock  in  this 
company.  All  stock  shall  be  common. 

Sec.  10.  These  By-Laws  and  the  Constitution  may 
be  changed,  amended  or  altered,  at  any  time,  by  a 
two-thirds  vote  of  all  the  shareholders  at  any  reg- 
ular or  called  meeting,  said  change  not  to  conflict 
with  the  articles  of  incorporation. 

To  get  new  members  into  a  cooperative  company 
a  good,  way  is  to  pay  net  profits  to  outsiders  just  as 
is  paid  to  members,  but  pay  it  in  credits  on  stock 
till  enough  is  credited  to  amount  to  one  share.  There- 
after such  share  is  on  equal  footing  with  all  other 
shares.  At  the  close  of  the  season  you  will  audit 
the  books  and  determine  the  status  of  the  company 
after  a  season's  business.  Take  a  balance  and  de- 
termine net  profits.  If  there  are  none,  then  there  is 
nothing  to  do  but  call  it  even  and  start  anew.  If 
a  deficit,  the  next  move  is  to  curtail  expenses,  in- 
crease business,  secure  more  efficient  management,  or 
quit  business.  But,  if  there  is  a  profit  over  actual 
running  expenses,  the  first  thins:  is  to  pav  the  pre- 
scribed interest  on  the  capital  invested.  After  this, 
if  there  is  still  a  "leaving,"  provide  for  deterioration. 
Then,  if  there  is  a  net  profit,  it  is  to  be  distributed 
among  the  patrons  according:  to  the  monev  value  of  the 
business  furnished  by  each,  if  he  is  a  member  of  the 


380  Markets    and   Rural  Economics 

association;  if  he  is  not  a  member  give  him  the  same 
refund,  only  he  is  paid  in  credits  on  a  share  of  stock 
till  it  amounts  to  a  share,  and  then  he  gets  the  overplus 
in  cash  the  same  as  any  other  cash-paying  member. 
If  the  plant  is  in  debt  the  credits  will  be  given  to 
each  stockholder  in  additional  stock,  and  the  money 
kept  in  the  treasury  to  pay  off  the  indebtedness.  This 
capitalizes  earnings  till  the  physical  indebtedness  is 
liquidated.  If  all  the  stock  is  sold  that  is  needed 
to  be  marketed,  and  new  applications  are  made  for 
shares,  it  is  in  the  by-laws  that  those  holding  the 
greatest  number  of  shares  must  sell  their  excess  to  the 
new  applicants,  provided  the  applicant  is  voted  to 
be  allowed  membership.  This  could  not  be  seriously 
objected  to,  as  the  cooperative  company  is  not  or- 
ganized primarily  to  make  money  for  stockholders 
but  to  efficiently  distribute,  purchase,  or  produce  for 
its  members  at  the  least  possible  cost — and  the  more 
members  the  more  successful  the  business. 


BIBLIOGRAPHY 

AGRICULTURAL    HISTORY 

Agriculture  in  the  Middle  Ages,  W.  F.  Allen. 
History  of  the  English  Landed  Interests,  R.  H.  Gar- 

nier  ( London  and  N.  Y. ) . 
Progress  in  Agriculture,  Charles  H.  Flint,  1780-1860 

in  ''Eighty  Years'  Progress"  (N.  Y.  and  Chicago). 
Economic  History  of  the  United  States,  E.  L.  Bogart 

(N'.Y.,  1908). 

The  Cotton  Industry,  M.  B.  Hammond  (N.  Y.). 
Economic  History  since  1763  (N.  Y.). 

AGRICULTURAL  AND  INDUSTRIAL  PROBLEMS 

The  Modern  Farmer  in  his  Business  Relations,  Ed- 
ward F.  Adams   (N.  Y.,  1892). 
Farming    Corporations,    Wilber    Aldrich     (N.    Y., 

1892). 
The  Business  Side  of  Agriculture,  A.  G.  L.  Roggers 

(London,  1904). 
Chapters  in  Rural  Progress,  Kenyon  L.  Butterfield 

(Chicago,  1908). 
Rural  Wealth  and  Welfare,  G.  T.  Fairchile  (N.  Y., 

1900). 
Rural  Problems  in  America,  Sir  Horace  Plunkett  (N. 

Y.,  1912). 
State  Socialism  and  Nationalization  of  Land,  Henry 

Fawcett. 

Symposium  on  the  Land  Question,  J.  H.  Levy. 
Social  Unrest. 


382  Markets    and   Rural    Economics 

The  Menace  of  Privilege,  Henry  George  (N.  Y.). 
Theory  of  Industrial  Revolution,  Adams,  1913. 
Future  of  the  Working  Class,  Robt.  W.  Babson  (Bos- 

ton,  1913). 
Valuation  of  Public  Utilities. 

MARKETING 

Markets  for  the  People,  Sullivan  (N.  Y.). 

Produce  Markets  and  Marketing,  Seibel   (Chicago, 

1912). 
How  to  Make  Produce  Marketing  Profitable,  Slocum. 

AGRICULTURAL  ECONOMICS 

Principles  of  Rural  Economics,  T.  N.  Carver   (N. 


Agricultural  Economics,  H.  C.  Taylor  (N.  Y.,  1911). 
Farm  Management,  Card  (N.  Y.). 
Farm  Management,  Warren  (N,c.  Y.). 
Application  of  capital  to  land,  Sir  Edward  West  (Bal- 

timore,  1903). 
Principles  of  Agriculture,  Albrecht  Thaer   (N.  Y., 

1846). 
Influence  of  Farm  Machinery  on  Production,  H.  W. 

Quaintance  (N.  Y.,  1904). 
The  Influence  of  Crops  upon  Business  in  America, 

A.  P.  Andrew  (Jou.  EC.,  1906). 
Agriculture,  W.  P.  Brooks  (Springfield,  1901). 
Foundations  of  Scientific  Agriculture,  Samuel  Cooke 

(London,   1897). 
Soil  Fertility  and  Permanent  Agriculture,  C.  G.  Hop- 

kins   (Boston,    1910). 

Practical  Agriculture,  C.  C.  James  (N.  Y.,  1902). 
Economic  Rurale,  E.  Jouzier  (Paris,  1903). 
Cyclopedia  of  American  Agriculture,  L.  H.  Baily  (N. 

Y.,  1909). 

COOPERATION 

History  of  Cooperation,  Holyoke   (London,   1906), 
two  vols. 


Markets    and    Rural    Economics  383 

History  of  Rochdale  Pioneers,  Holyoke  (London, 
1900). 

History  of  Cooperation  in  Scotland,  Maxwell  (Glas- 
gow, 1910). 

Fifty  Years  of  Cuthbert's  Cooperative  Association, 
Maxwell  (Edinburg,  1909). 

How  to  Cooperate,  Myrick  (N.  Y.,  1910). 

Industrial  Cooperation,  Webb   (Manchester,  1904). 

Cooperation  at  Home  and  Abroad,  Fay  (London, 
1908). 

Mutual  Aid,  Kropotkin   (London,   1902). 

Twenty-eight  Years  of  Copartnership  at  Guise,  Wil- 
liams (London,  1900). 

Cooperation,  Vols.  i,  2,  3,  4  (Minneapolis,  1914). 

Organized  Agriculture,  Pratt. 

Cooperation  Among  Farmers,  Coulter  (N.  Y.,  1911). 

Cooperative  Agriculture,  Powell  (N.  Y.,  1913). 

The  New  Competition,  Eddy. 

GOVERNMENT  DOCUMENTS 

Hearings  on  Cotton  and  Grain  Exchanges  before  Agr. 
Com.  House,  1910. 

Report  on  Cotton  Exchanges  by  Commissioner  of  Cor- 
porations, 1909. 

Hearings  on  Rural  Credits  63,  Cong.  Sec.  Session, 
1914. 

Report  of  the  American  and  U.  S.  Commissions,  Sen- 
ate Doc.  214,   1913,  and  the  bibliography  accom- 
panying it. 
Publications  of  American  Academy  of  Political  and 

Social  Science: 

Commerce  and  Transportation  (January,  1902). 

Finance  (November,  1902). 

Federal  Regulation  of  Corporations  (November, 
1905). 


384  Markets    and   Rural    Economics 

Business  Management  and  Finance  (January,  1905). 

Labor  and  Wages  (March,  1909). 

Stocks  and  the  Stock  Market  (May,  1910). 

Banking  Problems   (November,  1910). 

American  Produce  Exchange  Markets    (September, 


„ 
Country  Life  (March,  1912). 

The  Cost  of  Living  (July,  1912). 

The  Cost  of  Food  Distribution  (December,  1913). 

The  Consumers'  Control  of  Production. 

Work  of  the  National  Consumers'  League. 

Needs  for  Currency  Reform. 


OPINIONS  OF  LEADING  EDUCATORS, 
COLLEGES  AND  UNIVERSITIES 

We  have  no  separate  department  dealing  with  the 
problem  of  markets.  This  is  a  subject  which  is  pre- 
sented in  the  department  of  Rural  Economy.  Thus 
far  the  subject  has  been  presented  only  as  a  part 
of  the  general  course  in  Rural  Economy,  but  next 
year  a  special  course  will  be  given  on  Marketing  and 
Prices,.  This  will  be  open  to  those  students  who 
have  had  our  general  course  in  Rural  Economy.  In 
other  words,  our  students  who  take  the  course  in 
Marketing  and  Prices  will  have  had  a  general  course 
in  Rural  Economy  and  previous  to  that  a  comprehen- 
sive course  in  General  Economics. 

(Signed)  C.  N.  LAUMAN, 
Department  Rural  Economy, 

Cornell   University. 

We  have  had  for  some  time  a  course  in  Agricultural 
Economics.  During  the  last  two  years  we  have  had  a 
course  in  Research  and  Agricultural  problems,  and  a 
two-hour  course  in  Markets  and  Marketing.  Under 
marketing  we  have  differentiated  manufactured  and 
agricultural  articles  with  respect  to  the  problems  of 
marketing,  closing  with  a  discussion  of  cooperative 
marketing.  (Signed)  A.  W.  TAYLOR, 

Department   of  Economic  Science, 

State   College   of  Washington. 


386  Markets    and   Rural   Economics 

I  think  an  up-to-date  course  in  cooperative  market- 
ing in  the  high  schools  would  accomplish  excellent 
results,  and  it  is  our  desire  in  the  near  future  to  in- 
clude in  the  high  school  course  in  agriculture  the 
important  phases  in  the  marketing  of  farm  produce, 
including  cooperative  marketing. 

(Signed)   C.  S.  KNIGHT, 
Prof,   of  Agronomy,    University   of  Nevada, 

Reno,   Nevada. 

Our  course  in  farm  management  devotes  some  time 
to  the  subject  of  marketing.  Also,  in  our  course  of 
agricultural  economics,  a  portion  of  the  time  is  taken 
up  with  cooperation  in  agriculture. 

(Signed)    HOMER   C.   PRICE, 
Dean,   Ohio  State   University, 

Columbus,    O. 

It  seems  to  me  that  in  cooperative  marketing,  as 
well  as  packing  and  grading  goods  for  the  markets 
by   a    representative   body  representing   a   group   of 
farmers,  lies  the  chief  success  of  farming  in  the  future. 
I  believe  much  can  be  done  in  way  of  extension  work 
along  this  line,  and  also  much  can  be  done  in  way 
of  teaching  this  same  work  in  high  schools,  especially 
in  what  may  be  considered  rural  high  schools. 
(Signed)  GEO.  H.  VON  TUNGLEN, 
Dept.  Economics  and  Social  Science, 
Iowa  State  College,  Ames,  Iowa. 

In  June,  1913,  the  University  of  Louisiana  under- 
took to  facilitate  the  marketing  of  farm  produce  to 
the  best  advantage  by  employing  an  agent  to  travel 
over  the  state  and  organize  shipping  clubs.  By  this 
means  small  producers  are  enabled  to  pool  their  prod- 


Markets    and    Rural    Economics  387 

ucts  and  secure  better  transportation  rates  and  fa- 
cilities, as  well  as  bett  markets.  The  University 
has  also  assisted,  throu  i  its  department  of  animal 
industry,  in  the  organization  of  dairy  associations,  to 
enable  the  dairymen  to  secure  better  rates  and  more 
careful  handling  of  the  milk  and  cans  in  transit. 

(Signed)  WM.  O.  SCROGGS, 
Department  of  Economics  and  Sociology, 
University  of  Louisiana,  Baton  Rouge,  La. 

It  seems  to  me  that  it  might  readily  find  a  place  in 
special  vocational  schools  and  special  secondary 
schools.  (Signed)  J.  H.  SKINNER, 

Dean,   School  of  Agriculture, 
Purdue  University,  Lafayette,  Indiana. 

We  have  a  department  of  Agricultural  Economics 
at  the  University  of  Wisconsin,  in  which  the  subject 
of  Markets  receives  the  entire  time  of  one  professor 
and  some  assistance.  (Signed)  H.C.TAYLOR, 

Department  of  Agricultural  Economics, 
University  of  Wisconsin,  Madison,  Wisconsin. 

I  heartily  approve  of  the  idea  of  having  coopera- 
tive marketing  taught  in  the  high  schools;  that  is, 
if  suitable  teachers  can  be  secured. 

(Signed)   CHAS.  C.  THATCH, 
Pres.  Alabama  Polytechnic  Institute, 

Auburn,    Alabama. 

I  believe  that  cooperative  marketing,  together  with 
all  the  phases  of  the  business  side  of  farming,  should 
have  a  prominent  place  in  a  High  School.  I  believe 
that  the  only  economic  and  effective  solution  of  the 
rural  problem  is  through  the  proper  education  of  the 


388  Markets    and   Rural    Economics 

boys  and  girls,  while  it  is  their  business  to  study  and 
prepare  for  their  life  work.  It  seems  to  me  a  great 
mistake  to  pour  millions  of  dollars  into  the  education 
of  the  men,  and  only  thousands  for  the  education 
of  the  boys  and  girls  along  the  same  lines.  I  believe 
the  order  should  be  reversed. 

(Signed)    J.   J.   VERNON, 
Dean,  University  of  Florida, 

Gainesville,    Fla. 

In  this  country  the  whole  subject  of  cooperation 
is  a  very  important  one,  including  cooperative  mar- 
keting, and  I  should  advocate  its  teaching  in  con- 
nection with  the  agricultural  courses,  times  and  means 
permitting.  (Signed)  R.  H.  FORBES, 

Director  Experiment  Station, 
University   of  Arizona,    Tucson,    Arizona. 

It  should  of  course  be  a  feature  of  the  general 
course  of  instruction  as,  applied  to  agriculture,  live 
stock,  or  domestic  science. 

(Signed)  ANDREW  M.  SOULE, 
President    University    of   Georgia, 

Athens,    Ga. 

Cooperative  marketing  might  be  taught  in  high 
schools  with  advantage  to  both  pupils  and  commu- 
nity. (Signed)  J.  E.  KAMMEYER, 
Prof,  of  Economics,  State  Agricultural  College, 

Manhattan,   Kansas. 

The  Minnesota  College  of  Agriculture  has  a  divi- 
sion of  Research  in  Agricultural  Economics,  which 
is  studying  marketing  problems  and  organization 
among  farmers,  as  Well  as  other  subjects  dealing  with 


Markets    and    Rural    Economics  389 

rural  economics.  The  course  in  agricultural  eco- 
nomics that  I  give  is  devoted  largely  to  marketing 
and  organization  work.  A  seminar  in  marketing  is 
also  held  for  advanced  students.  I  have  already 
publicly  advocated  that  the  rudiments  of  cooperation 
and  marketing  be  taught  not  only  in  the  high  school 
but  in  rural  schools.  I  believe  it  would  be  a  fine 
scheme.  (Signed)  L.  D.  H.  WELLS, 

Chief  of  Division  of  Research 

In   Agricultural  Economics, 
University  of  Minnesota,  St.  Paul,  Minn. 

I  have  no  hesitation  in  saying  that  I  feel  sure  the 
work  of  cooperation  should  be  taught  in  high  schools, 
and  for  the  reason  that  our  graduates  are  teaching  in 
high  schools,  this  course  has  been  given  every  mem- 
ber of  the  graduating  class. 

(Signed)  H.  A.  MORGAN, 
Dean,    University   of    Tennessee, 

Knoxville,   Tenn. 

In  agricultural  high  schools,  or  in  an  agricultural 
course  in  any  high  school,  it  would  seem  to  me  that 
cooperation  might  well  be  a  part  of  the  work. 
(Signed)    GUY   C.   SMITH, 
Prof,  of  Economics,  N'ew  Hampshire  College, 

Durham,   Nl   H. 

Should  the  schools  have  either  a  well-developed 
agricultural  department,  or  a  commercial  and  eco- 
nomic department,  the  subject  might  well  receive  at- 
tention in  that  connection. 

(Signed)  C.  A.  DUNNIWAY, 
President  University  of  Wyoming, 

Lamaria,   Wy. 


39°  Markets    and   Rural    Economics 

I  think  the  fundamental  principles  of  cooperation 
should  be  as  widely  disseminated  as  possible,  and 
believe  the  High  School  would  be  one  effective  me- 
dium. (Signed)  H.  C.  FILLEY, 

Asst.  Prof.  Farm  Management, 
University   of   Nebraska,    Lincoln. 

It  seems  to  me  that  the  whole  question  of  coopera- 
tion, not  only  in  marketing,  but  of  buying  and  other 
neighborhood  operations,  should  be  taken  up  in  con- 
nection with  high  school  economics  and  high  school 
agriculture.  (Signed)  L.  H.  HAWKINS, 

Specialist  in  Agricultural  Education, 
University   of  New   York,   Albany,   N.   Y. 

I  believe  it  would  be  a  most  important  step  in  ad- 
vance to  have  cooperative  marketing  taught  in  the 
high  school.  (Signed)  WM.  R.  CAMP, 

Chief  Marketing  Division,  N.  C.  Exp.  Station, 

West   Raleigh,   N.   C. 

I  see  no  reason  why  some  attention  might  not  be 
given  to  cooperative  marketing  in  a  commercial  course. 
As  to  whether  the  subject  should  be  generally  intro- 
duced or  not  would  depend  upon  our  theory  as  to  the 
function  of  the  High  School.  The  fundamental  prin- 
ciple of  cooperative  marketing  might  also  properly 
be  taught  in  connection  with  a  class  in  economics. 

(Signed)  CHAS.  F.  WHEELOCK, 
Asst.    Comm.   for  Secondary   Education, 
University  of  New  York,   Albany,   N.   Y. 

I  firmly  believe  that  this  line  of  work  should  be 
taught  in  our  schools.  (Signed)  M.  J.  ABBEY, 

Prof.   Agricultural   Education, 
West  Va.  University,  Morgantown,  W.  Va. 


Markets    and    Rural    Economics  391 

I  think  we  are  one  of  the  first,  if  not  the  first, 
college  in  the  country  to  introduce  courses  in  coopera- 
tion and  marketing  in  our  regular  college  curriculum. 
Our  course  in  cooperation  was  introduced  some  years 
ago,  and  our  course  in  markets  more  recently.  We 
have  a  number  of  vocational  agricultural  high  schools 
in  Massachusetts,  and  some  agricultural  departments 
in  ordinary  high  schools.  We  also  have  a  very  large 
number  of  corn  and  potato  clubs.  In  all  of  these  we 
think  it  is  advantageous  to  teach  and  to  practice  the 
principles  of  cooperative  marketing. 

(Signed)  DR.  ALEXANDER  E.  CANCE, 

Head  Department  of  Agricultural  Economics, 

Agricultural   College,   Amhurst,    Mass. 

I  believe  that  Cooperative  Marketing  and  all  other 
aspects  of  rural  life  should  be  taught  in  the  high 
schools.  We  teach  too  much  about  the  Agriculture 
of  Vergil  and  too  little  about  the  country  life  of 
America  in  our  schools. 

(Signed)  L.  L.  BERNARD, 
Departments  of  History  and  Social  Sciences, 

University   of   Florida. 

We  offer  a  fairly  complete  course  covering  the 
whole  field  of  Agricultural  Economics,  including  and 
laying  dominant  stress  upon  the  subjects  of  Markets 
and  Rural  Credits.  Our  college  is  attaching  great  im- 
portance to  these,  both  from  the  standpoint  of  re- 
search and  practical  work. 

(Signed)  HECTOR  MCPHERSON, 
Departments  of  Political  Economy 

and  Rural  Economics, 
Oregon  Agricultural  College,  Corvallis,  Ore. 


392  Markets    and    Rural    Economics 

Lectures  on  Cooperation  and  Marketing  are  given 
to  our  secondary  students  in  the  School  of  Agricul- 
ture. We  are  in  the  formative  period  of  this  work. 
We  shall  soon  have  a  separate  department  of  Rural 
Economics. 

I  favor  the  teaching  of  Cooperative  Marketing  in 
the  High  Schools.  If  a  separate  course  cannot  be 
given  it  should  be  given  an  important  place  in  the 
course  in  economics. 

(Signed)  A.  S.  HARDING, 
Prof.   Department   of  History   and 

Political  Science, 
South   Dakota    State    College. 

SUPERINTENDENTS  OF  EDUCATION 

I  am  sure  that  in  connection  with  the  Commercial 
Courses  of  our  High  Schools  it  would  be  very  de- 
sirable to  have  taught  the  subject. 

(Signed)  PAYSON  SMITH, 
State  Supt.   Public  Schools, 

Augusta,  Me. 

It  seems  to  me  that  it  would  be  an  excellent  plan 
to  have  matters  of  this  kind  brought  before  the  pu- 
pils in  our  high  schools.  It  would  be  along  the  line 
of  practical  agriculture,  and  in  Ohio  we  are  giving 
especial  attention  to  this  branch  of  study.  We  are 
teaching  it  in  city  and  county  schools  alike. 

(Signed)  FRANK  W.  MILLER, 

Supt.   Public   Instruction, 

Columbus,    O. 

I  think  this  subject  might  well  be  discussed  in  the 


Markets   and   Rural   Economics  393 

department  of  Economics  or  some  of  the  vocational 
courses  in  High  Schools. 

(Signed)   P.  E.  McCLENEHAN, 
1      Inspector   of  Secondary   Schools, 

Des   Moines,   Iowa. 

It  occurs  to  me  that  every  text  book  of  agriculture 
that  is  used  in  our  high  schools,  should  have  chap- 
ters dealing  with  this  subject.  Perhaps  the  subject 
is  of  enough  importance  to  constitute  a  study  in  itself. 

(Signed)   D.  M.  BOWEN, 
Sec'y  Board  of  Educational  Administration, 

Topeka,   Kan. 


394  Markets    and   Rural   Economics 

We  have  a  plan  by  which  we  hope  to  teach  what 
we  call  "Farm  Management"  in  some  of  our  high 
schools,  and  part  of  that  course,  I  take  it,  is  to  be 
along  the  lines  of  marketing  the  products  of  the  farm. 

(Signed)  HAYWARD, 
High  School  Inspector, 
Grand   Forks,   N.   D. 

I  see  no  reason  why  the  subject  should  not  be  given 
in  connection  with  a  course  in  agriculture. 

(Signed)    R.   L.  WATTS, 

Dean   and  Director, 
State   College,    Pa. 

I  wish  to  say  that  I  am  in  accord  with  the  sug- 
gestion of  teaching  cooperative  marketing  in  the  high 
schools.  (Signed)  MASON  S.  STONE, 

Stipt.  Education, 
Montpelier,    Vt. 

I  would  think  that  it  could  be  well  taught  in  con- 
nection with  agriculture  and  domestic  science. 
(Signed)  R.  B.  TEITRICK, 
Deputy  Supt.   Public  Instruction, 

Harrisburg,    Pa. 

I  am  of  the  opinion  that  this  should  be  made  a 
part  of  the  course  in  Rural  Economics  which  should  be 
taught  in  every  High  School. 

(Signed)    MOSIAH   HALL, 
State  Inspector  of  High  Schools, 

Salt  Lake  City,  U. 

Tt  is  my  judgment  that  in  rural  schools  with  high 


Markets    and    Rural    Economics  395 

school  grades  the  subject  of  cooperative  marketing 
should  be  taught,  as  it  is  an  important  phase  of  rural 
economy.  A.  B.  MERIDITH, 

Asst.    Comm.    of  Education, 

Trenton,   N.   J. 

I  believe  teaching  cooperative  marketing  would  be 
a  good  thing.  The  great  need  of  education  at  the 
present  time  is  uto  hitch  up"  the  school  with  life.  If 
teaching  this  subject  accomplishes  nothing  else  than 
interesting  the  student  in  the  study  of  economic  con- 
ditions, it  would  be  worth  while. 

(Signed)  GRACE  M.  SHEPHERD, 

Supt.    Public  Instruction, 

Boise,    Idaho. 

I  am  of  the  opinion  that  the  subject  of  cooperative 
marketing  could  be  taught  with  profit  to  groups  of 
high  school  pupils.  I  think,  however,  that  it  more 
properly  belongs  in  the  vocational  school  curriculum 
and  in  extension  work  to  farmers.  After  having  had 
some  experience  in  this  field  it  may  be  that  we  shall 
extend  it  to  others  in  the  agricultural  field.  There 
would  seem  to  be  considerable  of  an  opportunity. 

(Signed)  ROBERT  O.  SMALL, 
Deputy  Commissioner,  Board  of  Education, 

Boston,  Mass. 

I  am  of  opinion  that  it  would  be  well  to  have  this 
subject  taught  in  high  schools.  It  seems  to  me  it 
could  be  taught  under  the  subjects  of  Economics  or 
Sociology.  (Signed)  WM.  P.  EVANS, 

State  Superintendent, 
Jefferson   City,    Mo. 


396  Markets    and   Rural   Economics 

It  seems  to  me  that  cooperative  marketing  would 
be  a  very  proper  subject  for  study  in  the  high  school, 
and  especially  in  the  high  schools,  in  farming  com- 
munities. It  could  be  included  in  the  course  in  rural 
economics  if  such  a  course  is  maintained.  It  seems 
to  me  highly  worth  while  to  extend  into  this  important 
field.  (Signed)  M.  P.  S  HAWKEY, 

State  Superintendent, 

Charleston,    West   Va. 

The  new  emphasis  that  is  being  put  upon  the  rural 
school  as  a  community  center  it  seems  to  me  thor- 
oughly justifies  the  teaching  of  cooperative  buying 
and  selling,  and  the  inauguration  of  such  study  in  our 
county  high  schools  would  be  a  decided  step  forward 
and  meet  a  very  urgent  need. 

(Signed)  WM.  F.  FEAGIN, 

State  Superintendent, 
Montgomery,    Ala. 


AMORTIZATION  TABLE 

Amount  of  Loan— $1,000.00  at  5%  for 
Thirty  Years 


Semi-            Interest         Paid  on       Expenses     Total              Amount  of 
Annual           at  5%           Principal           and  Semi-annual         Principal 
Periods                                                        Profits  Payments         Still  Unpaid 

I. 

$25.00 

$7.35 

$2.65 

$35.00 

$992.65 

2. 

24.81 

7.54 

2.65 

35.00 

985.11 

3. 

24.63 

7.72 

2.65 

35.00 

977.39 

4. 

24.43 

7.92 

2.65 

35.00 

969.47 

5. 

24.23 

8J2 

2.65 

35.00 

961.35 

6. 

24.03 

8.32 

2.65 

35.00 

953.03 

7. 

23.83 

8.52 

2.65 

35.00 

944.51 

8. 

23.61 

8.74 

2.65 

35.00 

935.77 

9. 

23.39 

8.96 

2.65 

35.00 

9-26.81 

10. 

23.16 

9.19 

2.65 

35.00 

917.62 

11. 

22.94 

9.41 

2.65 

35.00 

908.21 

12. 

22.70 

9.65 

2.65 

35.00 

898.56 

13. 

22.46 

9.89 

2.65 

35.00 

888.67 

14. 

22.21 

10.14 

2.65 

35.00 

878.53 

15. 

21.96 

10.39 

2.65 

35.00 

868.14 

16. 

21.70 

10.65 

2.65 

35.00 

857.49 

17. 

21.43 

10.92 

2.65 

35.00 

846.57 

18. 

21.16 

11.19 

2.65 

35.00 

835.38 

19. 

20.88 

11.47 

2.65 

35.00 

823.91 

20. 

20.59 

11.76 

2.65 

35.00 

812.15 

21. 

20.30 

12.05 

2.65 

35.00 

800.10 

22. 

20.00 

12.35 

2.65 

35.00 

787.75 

23. 

19.69 

12.66 

2.65 

35.00 

775.09 

24. 

19.37 

12.98 

2.65 

35.00 

762.11 

25. 

19.05 

13.30 

2.65 

35.00 

748.81 

26. 

18.72 

13.63 

2.65 

35.00 

735.18 

27. 

18.37 

13.98 

2.65 

35.00 

721.20 

28. 

18.02 

14.33 

2.65 

35.00 

706.87 

29. 

17.67 

14.68 

2.65 

35.00 

692.19 

30. 

17.30 

15.05 

2.65 

35.00 

677.14 

31. 

16.92 

15.43 

2.65 

35.00 

661.71 

32. 

16.54 

15.81 

2.65 

35.00 

645.90 

33. 

16.14 

16.21 

2.65 

35.00 

629.69 

34. 

15.74 

16.61 

2.65 

35.00 

613.08 

35. 

15.32 

17.03 

2.65 

35.00 

596.05 

36. 

14.90 

17.45 

2.65 

35.00 

578.60 

37. 

14.46 

17.89 

2.65 

35.00 

560.71 

38. 

14.02 

18.33 

2.65 

35.00 

542.38 

39. 

13.55 

18.80 

2.65 

35.00 

523.58 

40. 

13.09 

19.26 

2.65 

35.00 

504.32 

41. 

12.60 

19.75 

2.65 

35.00 

484.57 

42. 

12.11 

20.24 

2.65 

35.00 

464.33 

43. 

11.60 

20.75 

2.65 

35.00 

443.58 

44. 

11.09 

21.26 

2.65 

35.00 

422.32 

45. 

10.56 

21.79 

2.65 

35.00 

400.53 

46. 

10.01 

22.34 

2.65 

35.00 

378.19 

47. 

9.46 

22.89 

2.65 

35.00 

355.30 

48. 

8.88 

23.47 

2.65 

35.00 

331.83 

49. 

8.30 

24.05 

2.65 

35.00 

307.78 

50. 

7.69 

24.66 

2.65 

35.00 

283.12 

51. 

7.08 

25.27 

2.65 

35.00      1       257.85 

52. 

6.45 

25.90 

2.65 

35.00 

231.95 

53. 

5.80 

26.55 

2.65 

35.00 

205.40 

54. 

5.14 

27.21 

2.65 

35.00 

178.19 

55. 

4.45 

27.90 

2.65 

35.00 

150.29 

56. 

3.76 

28.59 

2.65 

35.00 

121.70 

57. 

3.04 

29.31 

2.65 

35.00 

92.39 

58. 

2.31 

30.04 

2.65 

35.00 

62.35 

59. 

1.56 

30.79 

2.65 

35.00 

31.56 

60. 

.79 

31.56 

2.65 

35.00 

.00 

Totals       I     $941.00      [$1,000.00      I     $159.00      [$2,100.00 

397 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $I.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


v   17  192£ 

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LD  21-100m-7,'33 

288 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


